Is Wall Street to blame for the collapse of five major credit unions?
Several of the biggest banks are accused of misrepresenting the risk of mortgage-backed securities they sold.
The WSJ reports: Federal regulators are blaming Wall Street’s biggest firms for the collapse of five institutions at the heart of the nation’s credit-union industry and are seeking to recoup tens of billions of dollars in losses on securities that doomed the five.
In one of the broadest accusations that Wall Street helped cripple financial institutions during the crisis, the National Credit Union Administration, or NCUA, has threatened to sue several investment banks unless they refund over $50 billion of mortgage-backed securities sold to the five institutions, called wholesale credit unions.
The NCUA is accusing Goldman Sachs Group Inc., Bank of America Corp.’s Merrill Lynch unit, Citigroup Inc. and J.P. Morgan Chase & Co. of misrepresenting the risks of the bonds to wholesale credit unions, which loaded up on the bonds in their role of investing on behalf of retail credit unions, according to people familiar with the situation.