JPMorgan, RBS sued over securities sales

@CNNMoney June 21, 2011: 10:45 AM ET

NEW YORK (CNNMoney) -- A federal watchdog for the credit union industry has sued JPMorgan and the Royal Bank of Scotland for allegedly misrepresenting the value of the mortgage-backed securities that they sold in recent years, triggering the failure of five credit unions.

The National Credit Union Administration filed suit in Kansas City federal district court for $800 million against the two financial firms.

The agency, which regulates and charters credit unions, said it expects "to file additional actions and seek a total amount of damages in the billions of dollars."

It has accused JPMorgan (JPM, Fortune 500) and the RBS of making "numerous material misrepresentations" of the "questionable securities" they sold to the credit unions for a total of $3 billion.

10 dirt-cheap housing markets

In one the lawsuits, the regulator said that many of these securities, which were backed by mortgages, "were all but certain to become delinquent or default shortly after origination. As a result, the [securities] were destined from inception to perform poorly."

Many of these sales occurred in 2006 and 2007. The securities have since been downgraded below investment grade, said the administration, even though more of them were rated triple-A at the time of sale.

JPMorgan and RBS declined to comment to CNN.

The credit union regulator vowed to take further action against similar abuses in the near future. "Additional law suits may follow," it said. To top of page

CNNMoney Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.