NEW YORK (Reuters) - A federal judge has thrown out FDIC lawsuits against Citigroup Inc, Bank of New York Mellon Corp and U.S. Bancorp to recoup some of the more than $695 million that the regulator said it lost by selling soured mortgage debt once owned by a failed Texas bank.
In a Friday night decision, U.S. District Judge Andrew Carter in Manhattan said the FDIC, the receiver for Austin-based Guaranty Bank, lacked standing to sue after selling the debt in question through a March 2010 resecuritization transaction.
“Any claims that plaintiff might have held, travelled with the bonds when they were transferred,” Carter wrote.
FDIC spokesman David Barr said the regulator, whose full name is Federal Deposit Insurance Corp, does not discuss pending litigation.
It had argued that the right to sue was a “personal” claim that it did not give away in the resecuritization.
The FDIC had accused the defendant banks of failing, in their roles as bond trustees, to ensure that mortgages backing $2.7 billion of securities bought by Guaranty were properly underwritten, or to require lenders to fix or buy back troubled loans.
According to the lawsuits, the securities were issued from 2005 to 2007, and sponsored by the EMC unit of Bear Stearns Cos or by a unit of Countrywide Financial Corp.
In 2008, JPMorgan Chase & Co bought Bear, and Bank of America Corp bought Countrywide.
Guaranty had roughly $13 billion of assets before its August 2009 demise. The FDIC at the time estimated that the bank’s closure would cost its deposit insurance fund $3 billion.
The cases in the U.S. District Court, Southern District of New York are FDIC v. The Bank of New York Mellon, No. 15-06560; FDIC v. U.S. Bank NA, No. 15-06570; and FDIC v. Citibank NA, No. 15-06574.