Calling it one more bait-and-switch operator, the NCUA said it filed suit on Thursday against Credit Suisse Securities, charging that the Swiss bank subsidiary misrepresented the $715 billion in mortgage-backed securities it sold to three corporates, causing their collapse.
The suit in federal court in Kansas City, Kan., is the latest filed by the agency against securities firms and alleges that Credit Suisse violated state and federal securities in underwriting and sale of the securities to U.S. Central, WesCorp and Southwest Corporate.
Similar actions already have been filed against J.P. Morgan Securities, RBS Securities, Goldman Sachs, Wachovia, UBS Securities and Barclay’s. More than $170 million in claims have been settled with Citigroup, Deutsche Bank Securities and HSBC, the first such settlements by a federal regulator for depository institutions, the NCUA said.
“These Wall Street firms ran a bait-and-switch operation, and the effects were felt not only in credit unions, but throughout the financial industry,” said NCUA Board Chairman Debbie Matz in a statement. “NCUA and credit unions have successfully worked together to restore stability to the credit union system. Now we are holding responsible parties, like Credit Suisse, accountable for their actions.”
The NCUA was the liquidating agent for the three corporates and said it has a statutory duty to seek to recover the losses and minimize assessments credit unions must pay to the Temporary Corporate Credit Union Stabilization Fund.
The suit claims Credit Suisse misrepresented the securities and omitted material facts about them – and disregarded underwriting guidelines – when they were sold to the corporates, leading the buyers to believe the risk was minimal.
“Credit Suisse is one of several firms that sold faulty securities to corporate credit unions, which led to their collapse,” Matz said. The full complaint is available online.
The 156-page complaint is available on NCUA’s website. It names Credit Suisse Securities, Credit Suisse First Boston Mortgage Securities Corp. and IndyMac MBS.