WICHITA, Kan. (6/14/13)--The Federal Deposit Insurance Corp. filed an amicus brief Wednesday in U.S. District Court for the District of Kansas that supports the National Credit Union Administration's eight lawsuits against big banks that sold residential mortgage-backed securities (RMBS) to corporate credit unions before the financial crisis.
The lawsuits are against RBS Securities Inc., Wachovia Capital Markets LLC, J.P. Morgan Securities LLC, UBS Securities LLC, Barclays Capital Inc., and Credit Suisse Securities (USA) LLC, and others (News Now May 1).
The FDIC said the court should allow NCUA to extend the statute of limitations regarding the RMBS claims against the banks, arguing that a contrary ruling could limit the FDIC's ability to apply its own statute of limitations extender provisions in suits related to failed banks.
"In enacting the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989, Congress sought to strengthen the FDIC's ability to stabilize the banking system by enhancing the financial security of the FDIC's insurance fund," the brief said. "The FDIC also may sue other financial institutions, as the NCUA has done here, for violation of federal and state securities laws.
"One of the tools Congress included in FIRREA is a provision that extends a statute of limitations that would otherwise have been applicable to causes of action of the failed institution, (the "Extender Statute")," the brief continued. "The purpose of the FDIC's Extender Statute is to minimize losses to the FDIC's insurance fund by preserving to the greatest extent permissible by law claims of the FDIC as receiver for failed insured financial institutions.
"The National Credit Union Administration Board has a substantively identical provision ..."
The FDIC has entered into hundreds of tolling agreements since1989, to suspend the running of limitations in the Extender Statute, the brief explained. The FDIC uses those types of agreements "to preserve claim without filing suit when it has not concluded investigations (for example) it was unable to obtain access to relevant documents in time."
"Tolling agreements therefore promote judicial efficiency by avoiding the unnecessary filing of lawsuits that otherwise would be settled without the initiation of litigation."
Because of those reasons, the FDIC has a strong interest in the court's interpretation of "the NCUA's parallel statute," the brief explained.
The brief concludes that for all the reasons it listed, the FDIC is asking the court to interpret the Extender Statute to permit tolling agreements.