DENVER (5/9/13)--Attorneys for the National Credit Union Administration and for RBS Securities and Wachovia Capital/Wells Fargo made their arguments Wednesday morning before an appeals court in Denver, which will decide key issues involving the statute of limitations in NCUA's lawsuits over residential mortgage back securities (RMBS) the banks sold to corporate credit unions.
At issue is whether powers granted to financial industry regulators by Congress in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) would allow a three-year extension of time beyond the statute of limitations for securities claims--allowing NCUA more time to file lawsuits in the securities cases, including suits against RMBS Securities and Wachovia.
NCUA in a number of lawsuits against big banks and securities dealers alleges that the companies misled corporates into investing in RMBS products that generated billions of dollars in losses and caused the corporates to collapse.
The banks allege the lawsuits weren't filed within the proper statute of limitations and statute of repose filing times of one year and three years.
NCUA maintained in its brief--filed by David C. Frederick, an attorney with Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC law firm in Washington, D.C., on March 1--that FIRREA displaces both the one-year and three-year periods. NCUA's brief notes that Congress passed FIRREA "in response to a major financial crisis: the mass failures of savings-and-loan associations in the late 1980s."
FIRREA, said the brief, provides "federal agencies acting as conservators, receivers, and liquidating agents with at least three years to investigate, evaluate, and if necessary pursue the claims on behalf of failed institutions, and further intended that these special provisions should be construed broadly to maximize recoveries by those federal agencies."
The decision by the Court of Appeals for the Tenth Circuit would have ramifications for several other cases that NCUA has brought against a variety of Wall Street banks and securities dealers. Those suits also involve the statute of limitations issue. Recently a U.S. District Court judge in Kansas stayed eight NCUA lawsuits, pending the appeals court's decisions in the RBS Securities/Wachovia consolidated case (News Now May 1).