NCUA has filed a case against the US investment bank in Federal District Court in Kansas and accused the lender for violating various federal and state securities laws by selling bad mortgage bonds.
NCUA board chairman Debbie Matz said firms like Morgan Stanley sold securities that turned out to be faulty, triggering a crisis in the credit union industry that has been extremely expensive to contain and repair, and credit unions are still paying the tab.
"All the credit unions we supervise and insure are sharing this burden.
"The people who are accountable, those who precipitated this crisis, should be required to shoulder that burden, as well," Matz added.
By twisting the figures pertaining to the underwriting of the RMBS, the accused firms sold the faulty securities to US Central and WesCorp corporate federal credit unions during the housing boom.
During the financial crisis of 2008-09, the mortgage sector busted, subsequently, both corporate credit unions became insolvent due to huge losses and were placed into NCUA conservatorship and consequently liquidated.
The regulator claimed that "the originators systematically abandoned the stated underwriting guidelines in the offering documents."
NCUA has also filed similar cases against Barclays Capital, Credit Suisse, Goldman Sachs, JP Morgan Securities, RBS Securities, UBS Securities, Wachovia, Bear, Stearns, and Washington Mutual Bank.
Until now, the agency has settled claims worth over $335m with Citigroup, Deutsche Bank Securities, HSBC, and Bank of America (BofA).
