WASHINGTON Federal regulators have sued JPMorgan Chase (JPM) over the sale of mortgage securities that contributed to the collapse of three credit unions.
The National Credit Union Administration's lawsuit alleges that Washington Mutual Bank gave a false picture of $2.2 billion in risky mortgage securities it sold to U.S. Central, Western Corporate and Southwest Corporate federal credit unions.
JPMorgan in 2008 acquired a major portion of the failed Washington Mutual from the U.S. government.
- Government to sell major portion of WaMu to JPMorgan
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The agency said in the lawsuit filed in federal court in Kansas on Friday that Washington Mutual misrepresented how risky the securities were and omitted key facts in sales documents.}
According to the complaint, all of the securities sold to the credit unions were at the time of issuance rated AAA, the same rating as U.S. Treasury bonds.
"The damage caused by the actions of firms like Washington Mutual has been extremely expensive to contain and repair," said Debbie Matz, a board chair of the National Credit Union Administration, in a statement on Friday. "It's only right that the people who caused the damage be required to pick up that burden, as well."
The lawsuit is the agency's third against JPMorgan over losses from residential mortgage-backed securities.
JPMorgan spokesman Joseph Evangelisti declined comment.
JPMorgan Chase is America's largest bank.