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Wall St. right target to recoup corporate losses CUNA
WASHINGTON (3/24/11)—Credit Union National Association (CUNA) General Counsel Eric Richard said the National Credit Union Administration (NCUA) is “looking at the right kind of parties” if the agency, as reported, intends to attempt to reclaim billions in securities-related corporate credit union losses from the biggest Wall Street firms. The Wall Street Journal on Wednesday reported that the NCUA has threatened legal action against Merrill Lynch, Goldman Sachs Group Inc., J.P. Morgan Chase, and Citigroup. The agency is reportedly seeking repayment of billions in losses that corporate credit unions sustained after their purchase of large amounts of mortgage-backed securities. The NCUA has said that it will sue if it is not paid, the Journal reported. CUNA’s Richard said that these Wall Street firms “have the potential to provide significant reimbursement of the credit union system’s recent losses.” However, reclaiming these losses may be a long, difficult process for the NCUA, Richard added. The NCUA told News Now that it does not comment on potential legal matters. Several corporate credit unions, including the conserved U.S. Central FCU and Western Corporate FCU, bought substantial amounts of highly rated mortgage-backed and asset-backed securities before 2009. These securities were severely devalued as a result of the turmoil in the overall mortgage market. The credit union regulator has reportedly alleged that the documentation for securities that Goldman sold to several now conserved corporate credit unions contained false statements and left out many key details. The NCUA took over more than $50 billion in mortgage-backed bonds from the failed credit unions. The agency was also forced to create a Temporary Corporate Credit Union Share Insurance Fund and is charging assessments to natural person credit unions to pay for the cost of stabilizing the troubled corporate credit union system. The NCUA has also repackaged and begun selling $35 billion of those bonds as NCUA Guaranteed Notes in another attempt to deal with these so-called legacy assets.


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