ALEXANDRIA, Va. – NAFCU on Wednesday called on NCUA to step up its efforts to seek recoveries from third parties responsible for the massive losses experienced by corporate credit unions.
In a letter to all three NCUA Board members, NAFCU noted how several Federal Home Loan Banks and other entities have filed lawsuits against Wall Street rating agencies and underwriters seeking recompense for failed mortgage-backed securities. The FHLBs, which suffered similar losses as corporate credit unions, have filed suit against large Wall Street investment banks that sold them MBS gone bad, claiming they were sold under false pretenses.
“In this regard, it has been NAFCU’s position that there have been multiple causes for the industry’s losses, including that of third parties outside the credit union system,” said NAFCU President Fred Becker. “While many causes have been discussed and various business, regulatory and legislative solutions have been offered and implemented, the credit union industry as a whole has yet to fully address potential misrepresentation by such third parties.”
Becker suggested NCUA target the Wall Street rating agencies which gave their highest ratings to many of the securities bought by the failed corporates that eventually went sour.
“In this vein,” wrote Becker, “we would urge the agency to make efforts to ensure that no stone is left unturned in mitigating the losses that have occurred.”
To date, NCUA has been slow to seek recompense for parties involved in the corporate meltdown, estimated to cost at least $16 billion. NCUA has filed a civil suit against directors and officers of WesCorp FCU and has indicated it plans to seek recompense for individuals in the failure of U.S. Central FCU, but has yet to seek legal remedies against parties involved in the sale of some $50 billion of toxic MBS bought by the five failed corporates, or from the officers and directors of the three other corporate failures, Members United Corporate FCU, Southwest Corporate FCU or Constitution Corporate FCU.
