Lawyers Get $350 Million
U.S. Rep. Darrell Issa (R-Calif.) confirmed during CUNA's Governmental Affairs Conference Feb. 25 that the net amount of the JPMorgan settlement applied to the credit union corporate stabilization fund was a little more than $1 billion.
An unnamed source from the NCUA had told Credit Union Times the agency received $1.073 billion net from the original $1.4 billion settlement.
That means lawyers pocketed nearly $350 million in the deal.
“That's my understanding – is the attorneys did much better than we did,” Issa told Credit Union Times when asked about the net amount of the settlement.
Issa was critical in 2012 of the contingency agreement the NCUA secured with attorneys to sue Wall Street banks over corporate credit union losses. As Chairman of the House Oversight and Government Reform Committee, Issa questioned whether the NCUA had violated an executive order that barred federal agencies from contingency deals. NCUA Inspector General William DeSarno responded, saying the fees were reasonable and permissible.
NCUA General Counsel Mike McKenna said Feb. 13 he could not reveal the net amount of the settlement because it would compromise ongoing negotiations in pending suits against other investment banks.
Issa was also asked if he was satisfied with the outcome of the settlement.
“I’m not really. Often, these settlements end up being more about who scores a big dollar figure rather than do we really provide aid for people that have been hurt and quite frankly a reasonable level of assurance that it won't happen again. I wish we could have done better but I wasn't at the table,” Issa said.
“To be honest, I think (DOJ) picked out JP Morgan rather than realizing that it was much broader and that's one of the challenges is that you have a settlement that really is not mired with equal players,” he added.
The NCUA still has several active lawsuits against other Wall Street banks that it alleges misrepresented risks on securities sold to five failed corporate credit unions. The most recent suits were filed on Sept. 23, 2013, against eight banks that sold nearly $2.4 billion in mortgage-backed securities to Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union.
In his remarks at GAC, Issa said Washington should act to eliminate the unfair advantages given to too-big-to-fail banks over credit unions and community banks.
The California congressman also criticized regulators saying they have increased regulatory burdens on small community financial institutions. Federal regulations are forcing credit unions to consolidate, he said, and creating mega credit unions that look an awful lot like mega banks. The very identity of credit unions could be destroyed in the process, he added.