Big Banks Win Court Case; Credit Unions Lose
A lawsuit brought by the National Credit Union Administration (NCUA) against Bank of America Corp and US Bancorp has been dismissed by a federal judge.
The suit addressed losses taken by CUs when $6.8 billion of toxic mortgage securities issued by these mega-banks went bust, contributing to the failure of five federal credit unions.
You remember how it went in the years leading up to the financial crisis: big banks bundled together trillions of dollars in mortgage related securities, and misrepresented the quality of those securities.
When the real estate bubble went “pop,” the underlying weakness of these securities became known – but it was too late for the smaller financial institutions who were left on the hook as holders of these securities.
However, in this case U.S. District Judge Katherine Forrest in Manhattan rejected claims by NCUA, saying that the credit union regulator’s right to sue had been previously assigned, according to a report in Reuters. In other words, NCUA lost on a technicality.
This is not necessarily a minor technicality, and it led to the case being tossed out.
Millions of Americans feel that the big banks got off easy for the behavior they exhibited prior to the near-collapse of the financial system in the last decade.
Many feel that more needs to be done to hold the banks responsible for the losses and sheer pain suffered by so many Americans. However, this lawsuit will apparently not be the means of addressing these issues.
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