Perhaps feeling left out thanks to Bank of America (BofA) to getting all of the ink lately devoted to mortgage-backed securities lawsuits, Goldman Sachs Group yesterday grabbed a few headlines of its own.
The banking giant was sued by the National Credit Union Administration (NCUA) over its sale of mortgage-backed securities to now-defunct credit unions, including U.S. Central and Western Corporate federal credit unions. NCUA is seeking more than $491 million in damages.
“NCUA’s new suit against Goldman Sachs claims the sellers and underwriters of the questionable securities made numerous material misrepresentations in the offering documents,” the NCUA wrote in a statement. “These misrepresentations caused the corporate credit unions to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial.”
Goldman Sachs, which already was staring down the barrel of other mortgage-related lawsuits from companies and investors as of June 30, also may face legal action from American International Group Inc. (AIG), Fannie Mae and Freddie Mac, Bloomberg reports. Goldman Sachs estimated that the other groups of companies and investors lost $485 million.
The NCUA suit against Goldman Sachs follows other complaints against other banks, including JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc. The damages from the Goldman Sachs suit combined with the totals from the other four lawsuits the NCUA has filed to date total nearly $2 billion.
“NCUA continues to carry out our responsibility to do everything reasonable in our power to seek maximum recoveries,” NCUA Board Chairman Debbie Matz said in the statement. “By these actions we intend to hold responsible parties accountable. Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions.”
Earlier this week, AIG piled on the heap of companies filing suit against BofA. In the suit, AIG accuses BofA and its subsidiaries Countrywide and Merrill Lynch of misrepresenting the quality of mortgages it sold to investors. As a result, AIG said it lost $28 billion in investments.