The National Credit Union Administration, the watchdog organization for the nation's credit unions, is suing JPMorgan and Royal Bank of Scotland for more than $800 million. The banks are accused of tricking five wholsesale credit unions into buying more than $3 billion worth of mortgage bonds that were "destined to perform poorly," reports The Wall Street Journal. While we'd like to imagine the "trickery" involved distracting photos of Jamie Dimon's piercing baby blues, or maybe Scottish bankers in a kilted cancan line plying stolid midwestern burghers with highballs of Black Grouse, the suit alleges that marketing materials either omitted or misstated key facts about the bonds, which lost nearly ten times the "expected amount" within a year. Oh.
The credit unions subsequently failed, among more than 40 nationwide that have gone under since 2009. Remaining credit unions (of which there are approximately 7,000) took on some of those losses and have been forced to charge higher interest rates to keep afloat. The lawsuit, filed in Kansas City Federal Court, is the first of eight the NCUA reportedly plans to bring against various banks and securities firms involved in bundling and selling the bad mortgages to the five failed credit unions, including eventually Goldman Sachs.
The legal action comes after loud calls from Congress and others to place the blame for the credit crisis on corporate shoulders: The FDIC, the Federal Housing Finance Agency, the SEC, the Manhattan District Attorney, several states' attorneys general, and the Justice Department have all begun investigations into companies involved in mortgage securitization — basically everyone but the Sanitation Department, then, and it sounds like maybe that's not so far behind.