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NCUA seeking nearly 2B in corporate CU damages
ALEXANDRIA, Va. (8/10/11)--The National Credit Union Administration (NCUA) is seeking $491 million in damages from Goldman Sachs & Co., alleging that the firm violated federal and state securities laws when it sold securities to U.S. Central FCU and Western Corporate FCU. Added to other lawsuits, that brings the total damages the agency is seeking to nearly $2 billion. The agency has requested nearly $2 billion in combined damages from Goldman Sachs, RBS Securities and J.P. Morgan Securities, LLC. This is the fourth suit of its kind, and the agency said it expects to take an additional five to 10 actions. The NCUA's suit claims that Goldman Sachs sellers and underwriters made several material misrepresentations in the offering documents, leading the corporates to believe the risk of loss associated with their investments was minimal, when in fact the risk was substantial. “The mortgage-backed securities experienced dramatic, unprecedented declines in value,” effectively rendering the corporates insolvent, the agency added. The NCUA’s latest published estimates are that the total eventual losses on these investments will be around $15 billion. “While the credit union industry generally fared better than the rest of the financial world over the last few years, the corporate credit union collapse remains the largest crisis ever faced by credit unions,” NCUA Chairman Debbie Matz said. “Fortunately, given the liquidity in the system, the average consumer is insulated from these past losses. However, it remains our statutory duty to replenish the insurance fund that protects consumer deposits by seeking recoveries.” Any recoveries from these actions will reduce the total losses resulting from the failure of five corporate credit unions and would help to reduce the amount of future corporate credit union stabilization fund assessments on credit unions, the NCUA has said. The Credit Union National Association has encouraged the NCUA to take "all reasonable actions" available to pursue effective restitution from securities firms that "share the culpability for the events that led to the corporate failures." For the full NCUA release, use the resource link.
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