U.S. top court turns away banks' appeal in credit unions case

Mon Jan 12, 2015 9:47am EST
 
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By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Monday declined to hear an appeal filed by several banks objecting to a lawsuit filed by a federal regulatory agency over their alleged role in selling mortgage-backed securities to now-failed credit unions.

The litigation against the lenders, including units of Royal Bank of Scotland PLC[RBSRB.UL] and Wells Fargo & Co, can now go forward.

The other defendants in the case are units of Nomura Holdings Inc and Novation Companies Inc.

The National Credit Union Administration is the independent federal agency that regulates, charters and supervises federal credit unions.

The regulator had sued on behalf of two failed credit unions, U.S. Central Federal Credit Union and Western Corporate Federal Credit Union. The regulator has separate litigation pending against other defendants over securities sold to other failed credit unions.

The government agency placed several credit unions into conservatorship following losses they incurred when what were considered low-risk investments in 2006 and 2007 were significantly downgraded following the 2008 financial crisis. The regulator says the lenders made misrepresentations, in violation of federal securities laws, when selling the securities.

The case has already made one trip to the Supreme Court. In June, the justices threw out a previous appeals court ruling that allowed the lawsuit to go forward.

The lenders sought high court review for a second time after the 10th U.S. Circuit Court of Appeals ruled in August 2014 that the regulator did not wait too long before filing its lawsuit.   Continued...

 
The U.S. Supreme Court building seen in Washington May 20, 2009.   REUTERS/Molly Riley