17 Dec 2012
NCUA’s suit—the largest the agency has filed to date—alleges Bear, Stearns & Co. made misrepresentations in connection with the underwriting and subsequent sale of mortgage-backed securities to U.S. Central, Western Corporate, Southwest Corporate and Members United Corporate federal credit unions.
All four corporate credit unions became insolvent and were subsequently placed into NCUA conservatorship and liquidated as a result of losses from these faulty securities. These failures caused significant losses to the credit union system. J.P. Morgan Securities purchased Bear, Stearns & Co. in 2008, after the demise of Bear, Stearns & Co.
“Bear, Stearns was one of several Wall Street firms that sold faulty securities to corporate credit unions, leading to their collapse and enormous losses across the industry,” said NCUA Board Chairman Debbie Matz. “Firms like Bear, Stearns acted unfairly by ignoring the rules for underwriting. They packaged these securities and then told buyers the paper was sound. When the securities plunged in value, we learned the truth. NCUA is now working to hold these underwriters accountable and secure recoveries on behalf of federally insured credit unions.”
The complaint alleges Bear, Stearns & Co. made numerous misrepresentations and omissions of material facts in the offering documents of the securities sold to the failed corporate credit unions. The complaint states underwriting guidelines in the offering documents were “abandoned” and the misrepresentations caused the credit unions to believe the risk of loss was minimal. In fact, these securities were “significantly riskier than represented” and “routinely overvalued.” The faulty securities, the complaint states, “were destined from inception to perform poorly.”
NCUA has eight similar actions pending against Barclays Capital, Credit Suisse, Goldman Sachs, J.P. Morgan Securities, RBS Securities, UBS Securities, and Wachovia.
0 comments:
Post a Comment