JPMorgan Chase asked a federal court in Wichita, Kansas Friday to postpone a civil suit brought against it by National Credit Union Administration (NCUA) in the failure of four corporate credit unions until a federal appeals court has decided whether the credit union regulator waited too long to file similar securities claims against RBS Securities, Wells Fargo’s Wachovia Capital Markets and other Wall Street banks.
Friday’s request came as
The JPMorgan settlement involves MBS sold by Bear Stearns, which JPMorgan bought after its 2008 collapse, while the NCUA suit relates to securities sold by JPMorgan to the failed corporates.
NCUA’s suit against JPMorgan revolves around $1.5 billion of MBS the Wall Street bank sold to four of the five failed corporates: U.S. Central Federal Credit Union, WesCorp Federal Credit Union, Members United Corporate Federal Credit Union and Southwest Corporate Federal Credit Union. The suit is filed in U.S. District Court in Kansas, which has jurisdiction over Lenexa, Kan.-based U.S. Central.
NCUA claims that JPMorgan failed to properly disclose the risks and true nature of the mortgages it packaged into MBS, which went bad within months of their sale, creating billions of dollars in losses.
NCUA has similar suits pending against six other Wall Street banks, including RBS, Wells Fargo (Wachovia), Credit Suisse, Goldman Sachs, UBS Securities and Barclays Capital, and has reached out-of-court settlements of similar claims with Citigroup, Deutsche Bank and HSBC.
In Friday’s motion to stay the NCUA case, JPMorgan notes that the Tenth Circuit Court of Appeals has agreed to review a lower court ruling allowing NCUA to extend the nominal statute of limitations on securities claims sold to the corporates — some as long ago as 2005—because the federal agency did not have access to the corporates’ records until after NCUA took the failed entities under conservatorship in March 2009. NCUA claims it is entitled to an extension of the filing deadline—known as an extender statute — because of the extraordinary authority granted federal bank and credit union conservators.
The lower court, the U.S. District Court for the District of Kansas, agreed with NCUA and has allowed the claims to proceed. The Tenth Circuit has agreed to review the lower court’s ruling.
“Depending on how this Court rules on other aspects of the Motion to Dismiss, it might require dismissal of the entire Complaint. In light of these circumstances, this action should be stayed,” argues JPMorgan in its motion to stay the NCUA claims against it.
