Wall Street faces fury over subprimes
Updated: 2008-02-19 12:59
"What they can't enforce through regulation, they will try to accomplish through suing," said David Bizar, a Hartford, Conn.-based attorney with the firm McCarter & English who defends against subprime mortgage lawsuits brought by consumers and regulators.
Already, the number of subprime-related cases filed in federal courts is outpacing the rate of litigation that emerged from the savings and loan meltdown in the late 1980s and early '90s, according to a study released Thursday.
The 278 subprime cases filed in federal courts in 2007 already equals half of the total 559 S&L cases handled over multiple years, according to the findings from Navigant Consulting Inc.
Criminal action also could be looming. The FBI said last month it was investigating 14 companies for possible accounting fraud, insider trading or other violations that could result in criminal charges. The FBI didn't identify companies but said the probe involves firms across the financial services industry.
The FBI is working with the Securities and Exchange Commission, which has civil enforcement powers. The SEC said in January that it had about three dozen active investigations under way.
In the rush to sue big business, there's plenty of blame to go around in the subprime meltdown, said Bizar, the lawyer who has represented lenders in subprime cases. Those include everyone from investors buying mortgage-related investments without understanding the risks, to credit-rating agencies that failed to alert investors to lenders' precarious positions as mortgage delinquencies spiked.
But the mess can be blamed more on unrealistic expectations than fraud, he said.
"You had a lot of people reaching to get into homes they couldn't afford, on the theory that it would go up in value," Bizar said.
|
|
|
||
|
||
|
|
|
|