Feds sue Goldman Sachs over credit union losses
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Federal regulators have filed the fourth in a series of about 10 planned lawsuits against banks that sold questionable mortgage-related securities to big credit unions that subsequently failed.
The latest target is Goldman Sachs & Co. A $401-million lawsuit, filed Tuesday in U.S. District Court in Los Angeles, accuses the giant Wall Street firm of misrepresenting the soundness of mortgage bonds that were purchased by the now-failed U.S. Central and Western Corporate federal credit unions.
Goldman Sachs spokesman Stephen Cohen declined to comment, saying the firm prefers not to litigate disputes in the media.
Lenexa, Kan.-based U.S. Central and San Dimas-based Western Corporate are so-called wholesale credit unions, which handle transaction processing and investments for the smaller retail credit unions that deal directly with the public.
Shocks from the mortgage meltdown and financial crisis caused five of these wholesale credit unions to fail, and the National Credit Union Administration is now suing to recoup some of the losses on $50 billion worth of bonds that plunged in value.
The other defendants so far are the Royal Bank of Scotland and JPMorgan Chase & Co., with the NCUA seeking a total of about $2 billion in damages.
The lawsuits illustrate how federal authorities, largely stymied in attempts to mount major criminal prosecutions related to the mortgage crisis, are targeting financial firms and their executives in civil lawsuits.
Among the federal agencies pursuing this course is the U.S. attorney’s office in Manhattan, which is seeking $1 billion from Deutsche Bank, Germany’s largest bank, related to mortgages backed by the Federal Housing Administration.
Another example is the Federal Deposit Insurance Fund, which is demanding that former officers of Washington Mutual, IndyMac and other failed banks cough up hundreds of millions of dollars to cover losses to the nation’s deposit insurance fund.
Goldman shares closed up $5.07 to $122.73, boosted by the late market rally. The stock fell as low as $111.60 earlier in the session.
For the Record, 8:50 p.m. Aug. 9: A previous version of this post said Goldman Sachs Group Inc. was being sued for $401 million. In fact, regulators are suing the firm for $491 million.
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JPMorgan Chase accused in mortgage securities cases
-- E. Scott Reckard
/ Associated Press
