The settlement involves four lawsuits filed by NCUA as liquidating agent against JPMorgan Chase, Bear Stearns and Washington Mutual for losses that corporate credit unions incurred as a result of buying the faulty securities. The U.S. Department of Justice and other government agencies were also included in the settlement.
“Today’s announcement by the Justice Department is extraordinary and will greatly benefit credit unions that have been paying for the losses caused by the financial institutions covered by this settlement,” NCUA chairman Deborah Matz said in a statement. “This resolution, combined with the $335 million already recovered, will enable NCUA to greatly reduce the assessments that all credit unions have to pay.”
NCUA noted that it was the first federal financial institutions regulator to recover losses from investments in faulty securities on behalf of failed FIs.
NCUA also has lawsuits pending against several other large banking companies, including Barclays Capital, Credit Suisse, Goldman Sachs, RBS Securities, UBS Securities and Morgan Stanley, alleging the banks sold faulty mortgage-backed securities to five corporate credit unions (WesCorp, U.S. Central, Southwest, Constitution and Members United) which later failed.
The agency has sued 13 other banking companies, alleging violations of federal and state anti-trust laws by their manipulating interest rates in the London Interbank Offered Rate system.
In addition, NCUA has settled claims worth more than $335 million with Citigroup, Deutsche Bank Securities, HSBC, and Bank of America. With the JPMorgan Chase settlement, NCUA said it has now recovered more than $1.75 billion from large banks and investment firms.
The agency said it is using net proceeds from the settlement to reduce the total Temporary Corporate Credit Union Stabilization Fund assessments charged to federally insured credit unions to pay for the losses caused by the failure of the five corporate CUs.