The US credit union regulator sued J.P. Morgan and Washington Mutual late Friday over $2.2 billion in mortgage securities sold to credit unions that collapsed because of losses from the securities. The suit is the third the regulator, the National Credit Union Administration, has filed against J.P. Morgan involving mortgage losses, and the second in the past month.
In December, it sued the bank over $3.6 billion in securities sold by Bear Stearns, which J.P. Morgan acquired during the financial crisis. In June 2011, the NCUA sued over some $1.4 billion in securities in which J.P. Morgan was the underwriter and seller. Both suits are still pending. J.P. Morgan bought the assets of Washington Mutual in 2008 after it failed and was seized by regulators.
In Friday''s lawsuit, the NCUA accused the bank of making misrepresentations in underwriting and selling mortgage-backed securities to US Central, Western Corporate and Southwest Corporate federal credit unions. The three credit unions became insolvent on the losses and were placed into NCUA conservatorship, the agency said. "The damage caused by the actions of firms like Washington Mutual has been extremely expensive to contain and repair," NCUA board chairman Debbie Matz said in a statement announcing the lawsuit, adding that "it''s only right that the people who caused the damage be required to pick up that burden, as well."
The lawsuit adds to a growing list of cases J.P. Morgan, the largest US bank, is fighting over conduct tied to the financial crisis, including the conduct of entities it acquired at the height of the crisis. A J.P. Morgan representative declined comment. In the past two years the agency has brought similar actions against Barclays Capital, Credit Suisse, Goldman Sachs, RBS Securities, UBS Securities , Wachovia and others.
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