LOS ANGELES In a ruling that could severely hamper NCUA’s recovery efforts in the corporate credit union bailout, a federal court yesterday tentatively dismissed some of NCUA’s $491 million of claims against Goldman Sachs & Co. on the grounds that they were filed too late.
U.S. District Judge George Wu’s 12-page ruling jeopardizes billions of dollars in claims brought by NCUA against the major Wall Street banks over MBS they sold to five corporate credit unions that eventually failed: U.S. Central FCU, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU.
Judge Wu, who is also presiding over one of NCUA’s two suits against RBS Securities, ruled NCUA waited too long to file seven of the NCUA's eight securities claims. The Judge cited the 1974 U.S. Supreme Court case American Pipe & Construction, which basically set certain timelines on class action claims.
NCUA said it will continue to pursue its claims against Goldman, despite yesterday’s ruling. “We do not generally comment on pending litigation; however, we still have a substantial case against Goldman Sachs, and we will continue to press that case,” said John Fairbanks, agency spokesman.
Yesterday’s ruling comes as a federal appeals court is also reviewing whether NCUA, by filing suit as long as six years after some of the MBS were sold to the corporates, waited too long to satisfy the statutes of limitations on such civil claims. NCUA said the clock did not start running on the statutes until the federal agency took the corporates under conservatorship and was able to get into their books, in the case of U.S. Central and WesCorp that was March 20, 2009, and for the other three it was Sept. 24, 2010.
Some of the MBS were sold as long ago as 2005, while NCUA did not start filing the suits-ten in total now—until 2011.
The stakes in these cases are enormous, as NCUA has filed as much as $9 billion of claims against Goldman, JP Morgan Chase, RBS, UBS Securities, Credit Suisse, Barclay’s Capital, and several others. The courts’ ruling will also impact tens of billions of dollars brought by other MBS investors, including Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
The failure of the five corporates forced NCUA to assume some $50 billion of securities, mostly residential mortgage securities, about $28 billion of which was repacked into new securities and sold to investors with a federal government guarantee. The resolution of the failed corporates is projected to cost credit unions as much as $20 billion.
