Back in 2010 the National Credit Union Administration (NCUA), a government agency, sued 14 executives of failed credit union Wescorp seeking at least $1 billion from the defendants or their insurers. The giant credit union was seized by the government in March 2009 after incurring nearly $7 billion in losses, “largely because of bad investments in mortgage-backed bonds,” the LA Times reported.
The Wescorp management team, not being clairvoyant, had piled their deposits into the wrong investments at the wrong time. But the government is always looking for a boogeyman to blame and sue. So, the 14 executives were accused of breach of fiduciary duty, negligence and fraud.
Fast forward two and half years, with the Wall Street Journal reporting,
Former executives of Western Federal Corporate Credit Union, known as WesCorp, must be shocked to learn that Washington now blames their troubles on somebody else. WesCorp bought a lot of the mortgage paper at issue and its managers were fired and then sued by regulators after the feds seized the failing credit union in 2009.
Now the government is suing Standard & Poors because it claims S & P was not “independent” and “objective” and was assigning Triple-A ratings to mortgage-backed securities that S&P knew were more risky, just to please clients. One of the victims of S & P’s chicanery cited by the Justice Department is Wescorp.
Other victims mentioned in the lawsuit are bailout zombies, Bank of America and Citigroup. And if you like strange coincidences, “But there will be benefits for the White House if Justice can airbrush the bank’s crisis-era portrait. Citi mortgage-investment veteran Jack Lew now serves as Secretary of the Treasury, which is the funniest story of all,” writes the WSJ.
And finally, as the WSJ points out, “The damage occurred because the same government that’s now suing S&P required financial institutions to use the ratings issued by S&P and the other raters.”
