Morgan Stanley has agreed to pay $225 million to resolve claims filed by the NCUA stemming from losses related to corporate credit unions' purchases of faulty residential mortgage-backed securities, the regulator announced Dec. 10.
“(The) 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 in a statement. “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 said in the release the U.S. Justice Department worked closely with the agency to achieve the favorable resolution.
The settlement stems from claims by the NCUA Board filed in 2013 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.
The NCUA said it will dismiss further pending suits against Morgan Stanley, while the financial firm did not admit fraud in the settlement.
Net proceeds from this settlement and others are used to pay claims against the failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund. The settlement brings total corporate recoveries to $2.425 billion, which further reduces the likelihood credit unions will have to pay future corporate assessments.
Other litigation continues by the regulator against other financial and securities firms. The NCUA settled a similar claim in October with Wachovia for $53 million.
NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt thanked the NCUA for its “aggressive litigation and recovery efforts,” in a statement. “We look forward to these recoveries ultimately flowing back to credit unions as soon as possible,” Hunt added.
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