WICHITA, Kan. The Securities Industry and Financial Markets Association on Friday told a U.S. appeals court here that NCUA’s two dozen suits against banks for the failure of the corporate credit unions could have wide ramifications for Wall Street and urged the panel to uphold a lower court ruling rejecting NCUA’s $555-million claim against Barclays Capital as barred by the statute of limitations.
The Wall Street lobbying group told the U.S. Court of Appeals for the Tenth Circuit in an amicus brief its members need certainty that securities they issue will not be subject to unlimited liability, even if NCUA, the FDIC and other federal regulators claim they should be given extra leeway in pursuing wrongdoing for failed credit unions and banks.
The U.S. District Court for the District of Kansas where U.S. Central FCU was headquartered this summer ruled that NCUA filed its 2012 securities claims, many of which extended all the way back to mortgage-backed securities sold in 2005 and 2006, too late to satisfy the three-year federal statute of limitations.
NCUA has appealed the lower court ruling by claiming the 1989 S&L bailout law, the Financial Institutions Reform, Recovery, and Enforcement Act, gives it and the bank regulators additional time to file securities claims, beginning when they take over a failed credit union or bank. Even then, says NCUA, the statute of limitations did not run during a so-called tolling period when both sides were negotiating a possible settlement of the claims.
The lower court in Kansas disagreed with NCUA and dismissed the Barclays claims, as well as billions of dollars of NCUA claims against JP Morgan Chase, UBS Securities and Credit Suisse Securities, ruling the tolling agreement did not stop the running of the statute of limitations.
NCUA entered into tolling agreements with the more than a dozen big banks it has sued over the sale of MBS to five corporate credit union failures in order to negotiate settlements. But the banks repudiated the tolling agreements and argued the tolling period did not stop the statute of limitations from running.
The securities group urged the court to reject NCUA’s appeal, arguing the financial markets need certainty on how long a dissatisfied or wronged customer has to bring a claim.
“Such statutes provide certainty and finality, set a time after which market participants are free from the fear of lingering liabilities and stale claims, and ensure that claims can be adjudicated based on evidence that is fresh,” wrote the SIFMA’s attorney. If NCUA or the FDIC disagree with the statute, said the securities group’s brief, they should work with Congress to amend the law.
The Barclays claims surround faulty mortgage-backed securities Barclays sold to U.S. Central FCU and WesCorp FCU, the two corporate credit union failures projected to cost NCUA and credit unions $12 billion to resolve.
