ALEXANDRIA, Va.– NCUA has announced a settlement with Morgan Stanley for $225 million to resolve claims arising from losses related to corporate credit unions’ purchases of faulty residential mortgage-backed securities.
The settlement covers claims asserted in 2013 by the NCUA Board on behalf of U.S. Central Federal Credit Union, Western Corporate Federal Credit Union, Members United Corporate Federal Credit Union and Southwest Corporate Federal Credit Union. NCUA said it will dismiss pending suits against Morgan Stanley in federal district courts in New York and Kansas. Morgan Stanley did not admit fault in the settlement.
Net proceeds from this settlement and others are being used to pay claims against the failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund. Stabilization Fund recoveries reduce borrowings from the U.S. Treasury and eliminate the need for assessments to federally insured credit unions.
“NCUA continues to pursue recoveries on behalf of the corporate credit unions against the financial firms we maintain contributed to the corporates’ losses,” NCUA Board Chairman Debbie Matz said. “These actions fulfill our statutory obligation to act in order to minimize costs to the credit union system resulting from the crisis. They also promote accountability and ensure consumers remain protected.”
NCUA Associate General Counsel John Ianno recognized the U.S. Justice Department’s involvement in the litigation.
"We appreciate the efforts of the Department of Justice, with whom we have worked closely in achieving this favorable resolution," Ianno said.
NCUA continues to pursue litigation in federal courts in New York, Kansas and California against financial firms, including RBS, Goldman Sachs, UBS and Credit Suisse, based on the sale of faulty securities that caused the collapse of five corporate credit unions.
The agency noted that on behalf of the failed corporates it has other litigation pending against securities firms alleging violations of state and federal anti-trust law by manipulation of interest rates through the London Interbank Offer Rate system. NCUA also has pending suits against financial firms alleging their failure to perform their duties as trustees of residential mortgage-backed securities trusts.