Last week, the NCUA added to its list of targets by suing Goldman Sachs for $491 million for losses corporates endured due to mortgage-backed securities. This is the fourth suit filed by the NCUA against securities firms, seeking a total of $2 billion in damages.
The NCUA will have to get into a very long line of parties seeking to be compensated for flailing mortgage-backed securities. Freddie Mac, Fannie Mae, AIG, Allstate and John Hancock are all likely to follow through on threats to sue Goldman.
Will the NCUA be successful? It’s hard to imagine that there will be any fast big-dollar settlements with these suits. They will be multiyear, expensive suits.
Kudos to the NCUA for their effort. But the NCUA needs to be transparent on legal costs and be realistic about the return. The NCUA states in its announcement that this suit is part of its “statutory duty" as conservator of the five failed corporates. The NCUA should take that same dutiful approach and dedication to the institutions it currently regulates by carefully evaluating the cost-benefit of these suits, and keeping the industry informed on any inordinate hits to the budget. Credit unions have to watch every penny in this low rate environment with weak loan demand. The NCUA should be doing the same.
The NCUA has another problem. They were the regulator inside those corporates monitoring the investments they are now suing over. The NCUA is even on record with Congress for its shortcomings with the corporate failures. It doesn't exactly paint a picture of a successful plaintiff. This is clearly a tough road ahead for a regulator that had its own role in the corporate disruption.
New Jersey Credit Union League