National Credit Union Association Threatens Lawsuit Against 4 Banks

NCUA website:

Another lawsuit centered around mortgage securities backed by faulty loans may be brewing.

The National Credit Union Administration (NCUA) has threatened to sue four banks and investment firms unless they refund more than $50 billion for mortgage-related bonds that went bad, according to the Wall Street Journal.

WSJ reported that Goldman Sachs, Bank of America’s Merrill Lynch unit, Citigroup, and J.P. Morgan Chase are accused of causing the collapse of five wholesale credit unions: U.S. Central Federal Credit Union, Western Corporation Federal Credit Union, Members United Corporate Federal Credit Union, Southwest Corporate Federal Credit Union, and Constitution Corporate Federal Credit Union, which the NCUA took control of in 2009 and 2010.

The four firms are accused of misrepresenting the risks of the bonds, which are now worth about $25 billion, which is half of their face value.

Last year the NCUA began selling off some of the bonds to try to recoup some of the losses