comsc US Politics | AMERICAblog News: Subprime fiasco fallout - everyone suing everyone
Join Email List | About us | AMERICAblog Gay
Elections | Economic Crisis | Jobs | TSA | Limbaugh | Fun Stuff

Subprime fiasco fallout - everyone suing everyone



| Reddit | Tumblr | Digg | FARK

Wouldn't it have been easier if "leaders" bothered to provide some reasonable ground rules? Obviously when people want to push the limits, they're going to find a way to do what they want to do. However, I reject the arguments that claim we could not have done anything and that "the market" will ultimately solve such excesses. Perhaps, but at what cost?

Our leaders both at the Fed and in Congress could have minimized the fallout but they all were too busy playing Republican financial experiments with our financial system. Just like the Republican societal experiments with supposed safe sex (abstinence programs), I wish they would just experiment amongst themselves and leave everyone else out of their little games.

A few examples of the lawsuits, after the jump.

This time, investors are aiming not only at mortgage lenders, brokers and investment banks but also insurers (American International Group), bond funds (State Street, Morgan Keegan), rating agencies (Moody's and Standard & Poor's) and homebuilders (Beazer Homes, Toll Brothers et al).

Borrowers, too, are suing both their lenders and the Wall Street firms that wrapped up their loans. Several groups of employees and pension-fund participants have filed so-called ERISA/401(k) suits against their own firms. Local councils in Australia are threatening to sue a subsidiary of Lehman Brothers over the sale of collateralised-debt obligations (CDOs), the Financial Times has reported. Lenders are even turning on each other; Deutsche Bank has filed large numbers of lawsuits against mortgage firms, claiming they owe money for failing to buy back loans that soured within months of being made.

“It seems that everyone is suing everyone,” says Adam Savett of RiskMetrics' securities-litigation group. “It surely can't be long before we get the legal equivalent of man bites dog, where a lender sues its borrowers for some breach of contract.”

The authorities, too, are baring their teeth. Several Wall Street banks have received subpoenas from New York's attorney-general, Andrew Cuomo, requesting information on their packaging of now-stricken securities. This comes on top of a deepening probe into possibly inflated home-price appraisals by brokers and lenders, including Washington Mutual and First American Corporation. Ohio's attorney-general, Marc Dann, has been just as hyperactive, suing over a dozen lenders and brokers.

No less important is the spadework being done by the Securities and Exchange Commission, America's main markets watchdog. It is conducting more than 20 investigations, including one into the arrangements banks entered into with hedge funds that may have been designed to hide or delay mark-to-market losses.
So instead of proper guidance and regulation, we are stuck in this cycle of lawsuits, counter lawsuits and probably counter-counter lawsuits. How is this any easier or less painful than regulation? I'd like to hear how this model is superior because it just looks nuts to me.

The other point that jumps out is the issue of lawsuits. Republicans always want to limit the right to sue though if we're not providing any oversight or regulations to protect people, what other options are there? Funny too that there are plenty of businesses suing, showing that they are just as open to lawsuits as regular people, despite their complaints about lawsuits. The old do as I say, not as I do from big business.


blog comments powered by Disqus