NCUA Suit Against Barclays Dismissed
A federal court last week dismissed a suit brought by NCUA against Barclays Capital for the sale of $555 million of faulty mortgage-backed securities to U.S. Central FCU and WesCorp FCU, one of nine suits NCUA has filed against Wall Street banks over the failure of the two corporate giants.
Judge John Lungstrum ruled NCUA waited too long to satisfy the statute of limitations before filing the claims, which came in September 2012, as much as six and seven years after Barclays sold the MBS to U.S. Central and WesCorp.
Judge Lungstrum also affirmed an earlier order and dismissed all of NCUA's claims against Credit Suisse related to $590 million of MBS sold to the two corporate giants, dealing a major blow to the credit union regulator's efforts to recover billions of dollars in losses for the failure of U.S. Central, WesCorp Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU.
Both suits were filed in U.S. District Court for the District of Kansas, which has jurisdiction over activities related to Lenexa, Kan.-based U.S. Central.
NCUA said it disagrees with the judge's ruling. "We respectfully disagree with the rulings, and we are reviewing them," said John Fairbanks, chief spokesman for the agency. "We will continue to vigorously pursue our claims against the parties who sold the faulty securities to the corporate credit unions."
The ruling jeopardizes other suits NCUA has brought against underwriters of the MBS that sunk the corporates, including claims against JPMorgan Chase, Goldman Sachs, RBS Securities and UBS, which have all claimed NCUA waited too long to bring the suits.
NCUA claims a so-called extender statute allowed it to extend the three-year statute of limitations from the date it took over the failed corporates. But the judge ruled even still, the statute of limitations had expired on the Barclays and Credit Suisse claims.
In the Barclays case, Lungstrum ruled the regulator was required to file its claims against the company no later than March 20, 2012, three years after it was appointed conservator for the two failed corporate. The case, however, wasn't filed until September of last year.
U.S. Central, the one-time $52 billion central bank for credit unions, and WesCorp, a one-time $32 billion corporate, were both seized by NCUA in March 2009. The two failures are projected to cost NCUA $12 billion to resolve, costs which are being passed on by NCUA to credit unions in annual assessments.
The failure of the five corporates is projected to cost NCUA—and thus credit unions—more than $16 billion to resolve, though the final figure remains the subject of some debate.