When the giant San Dimas corporate credit union known as WesCorp went under in 2009, bad mortgage-backed securities were blamed for the debacle. Now, federal regulators are taking action against the sellers of those losing securities.
The National Credit Union Administration filed a lawsuit last week against Barclays Capital Inc. for allegedly misrepresenting the safety of $555 million in securities sold to WesCorp and U.S. Central Federal Credit Union, which also failed.
“Trust and accountability are two cornerstones of our financial system,” said NCUA board Chairman Debbie Matz in a statement. “As clearly outlined in our complaint, Barclay’s violated that trust by issuing faulty disclosures on securities underwritten by the firm.”
Barclays, based in New York, did not respond to requests for comment.
Over the past year, the agency has reached settlements on separate claims against Citigroup, Deutsche Bank Securities and HSBC totaling $171 million. The NCUA said it is “the first federal regulatory agency for depository institutions to recover losses from investments in faulty securities on behalf of failed financial institutions.”
WesCorp had been one of the country’s largest wholesale credit unions, which provide services to retail credit unions rather than individuals. The institution, which was tasked with investing funds from its credit union members, lost more than $7 billion during the financial crisis, largely from investments in mortgage-backed securities.
The wholesale operation was closed in early 2009 by the NCUA, which liquidated WesCorp’s assets this past July.
The suit against Barclay’s was filed in U.S. District Court in Kansas, where U.S. Central was based.
With the NCUA’s help, two local credit unions are finally coming into the digital age.
The agency has agreed to donate laptop computers to 14 small credit unions across the country that are still filing their quarterly reports and keeping records on paper. The institutions, which each have less than $10 million in assets, include two local credit unions: Zion Hill Baptist Church Federal Credit Union in Los Angeles and San Fernando Valley Japanese Credit Union in Sylmar.
The initiative is part of an NCUA effort to reduce waste by eliminating paper call reports by next year.
Pssst – wanna buy a bank?
The Federal Deposit Insurance Corp. can help.
The bank regulatory agency has announced a workshop in Los Angeles and two other cities for investors interested in acquiring assets of failed banks.
The FDIC said the program is designed for all types of investors, including hedge fund managers and private-equity firms. The agency particularly hopes to draw minority and female investors.
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