By Aruna Viswanatha
WASHINGTON Jan 4 The U.S. credit union
regulator sued JPMorgan and Washington Mutual late
Friday over $2.2 billion in mortgage securities sold to credit
unions that collapsed because of losses from the securities.
The suit is the third the regulator, the National Credit
Union Administration, has filed against JPMorgan involving
mortgage losses, and the second in the past month.
In December, it sued the bank over $3.6 billion in
securities sold by Bear Stearns, which JPMorgan acquired during
the financial crisis. In June 2011, the NCUA sued over some $1.4
billion in securities in which JPMorgan was the underwriter and
seller. Both suits are still pending.
JPMorgan bought the assets of Washington Mutual in 2008
after it failed and was seized by regulators.
In the Friday lawsuit, the NCUA accused the bank of making
misrepresentations in underwriting and selling mortgage-backed
securities to U.S. Central, Western Corporate and Southwest
Corporate federal credit unions.
The three credit unions became insolvent on the losses and
were placed into NCUA conservatorship, the agency said.
"The damage caused by the actions of firms like Washington
Mutual has been extremely expensive to contain and repair," NCUA
board chairman Debbie Matz said in a statement announcing the
lawsuit, "it's only right that the people who caused the damage
be required to pick up that burden, as well."
The lawsuit adds to a growing list of cases JPMorgan, the
largest U.S. bank, is fighting over conduct tied to the
financial crisis, including the conduct of entities it acquired
at the height of the crisis.
A JPMorgan representative could not immediately be reached
In the past two years the agency has brought similar actions
against Barclays Capital, Credit Suisse,
Goldman Sachs, RBS Securities, UBS Securities
, Wachovia and others.
Most of the cases are pending, but it has settled claims
against Citigroup, Deutsche Bank Securities and
HSBC for around $170 million.
The credit union regulator has been trying to recover losses
related to the failure of five institutions that it seized in
2009 and 2010 after they ran into trouble due to the crumbling
The wholesale credit unions have experienced more troubles
than their retail counterparts because they did not face the
same restrictions on permitted investments, leading to big
losses during the financial crisis.