LOS ANGELES NCUA asked a federal court here yesterday to reconsider a March ruling dismissing the vast majority of $491 million of claims against Goldman Sachs for mortgage-backed securities the Wall Street bank sold to corporate credit union failures U.S. Central FCU and WesCorp FCU, or at least certify the issue for an immediate review by the U.S. Court of Appeals.
In his March ruling, U.S. Judge George Wu said NCUA waited too long to file claims related to seven of the 13 MBS Goldman sold to the two failed corporates and issued a preliminary ruling dismissing the claims.
NCUA said in yesterday’s filing that a recent ruling by the U.S. Court of Appeals in a similar suit brought by Fannie Mae and Freddie Mac supports its case that the three-year statute of limitations on its Goldman claims did not start running until after NCUA liquidated U.S. Central and WesCorp. “The Second Circuit panel joined four other federal district judges that have disagreed with this (the California) Court’s ruling in that regard,” wrote the lawyers representing NCUA in the case.
If the U.S. District Court for the Central District of California continues to disagree with the Second Circuit Court ruling, then NCUA wants it to certify the issue for a so-called interlocutory appeal, one that occurs before the case has been decided in its entirety. “The emergence of this weight of authority from other circuits, combined with the lack of controlling authority in the Ninth Circuit, weighs heavily in favor of interlocutory appeal,” wrote the NCUA lawyers.
The filing comes as NCUA is fighting to save billions of dollars of separate corporate claims in Kansas where U.S. Central, the one-time $52 billion central bank for credit unions, was based. The appellate court, the U.S. Court of Appeals for the Tenth Circuit, held oral arguments on an interlocutory appeal in those cases yesterday.
Both cases are crucial to NCUA’s efforts to recoup an estimated $16 billion of losses it inherited from the failures of U.S. Central, WesCorp and three other corporates, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU.
NCUA has filed almost $9 billion of civil claims against dozens of subprime lenders and 10 Wall Street banks that packaged their loans into MBS sold to one or more of the five corporates. Among the banks being sued by NCUA are: Goldman, JP Morgan Chase, RBS Securities, UBS Securities, Credit Suisse Securities, Barclay’s Capital, and several defunct underwriters that have been acquired by surviving banks, including Bear Stearns, Washington Mutual and Wachovia.
In its suits NCUA alleges the Wall Street banks negligently abandoned their own underwriting standards in packing the subprime mortgages into MBS that failed or were significantly downgraded soon after their sale to the doomed corporates.