As I have previously noted (here), subprime risk may be found in some unexpected places. But since I first wrote about the dispersion of subprime risk, subprime contagion has spread to other parts of the credit marketplace. As a result, the credit meltdown story is no longer just about subprime.
On November 21, 2007, plaintiffs’ lawyers initiated separate securities class action lawsuits against the Federal Home Loan Mortgage Corporation (better known as Freddie Mac) and against bond insurer ACA Capital Holding. Both of these lawsuits reflect the deepening seriousness of the credit problems arising from the subprime lending meltdown, and the problems besetting
For those keen to cast blame for the subprime meltdown, the rating agencies have already emerged as a favored target. For example, when Citigroup recently announced (here) a significantly increased write-down of subprime mortgage assets, it attributed the action to recent rating agency asset downgrades.
The rating agencies’ own shareholders have already jumped
In the days following Citigroup’s November 4, 2007 announcement (here) that it would be writing off an additional $8 to $11 billion due to declines in values of U.S. subprime related debt exposures, as well as its announcement (here) of the departure of its Chairman and CEO Charles O. Prince,
If you are like me and you don’t feel fully briefed on Option-ARM mortgages, then you will want to read the September 2006 Business Week article entitled “Nightmare Mortgages” (here) describing the pitfalls of Option-ARM loans. Among other things, the article states: “The option adjustable rate mortgage (ARM) might be the riskiest and
Investors undoubtedly were angry after Merrill Lynch announced on October 24, 2007 (here) that the company’s 3rd quarter results included “write-downs of $7.9 billion across CDOs and subprime mortgages, which are significantly greater than the incremental $4.5 billion write-down Merrill Lynch disclosed at the time of its earnings pre-release.” The $3.4 billion write-down
As the subprime mortgage mess has unfolded, one of the contributing factors blamed for the meltdown has been the complicated investment instruments into which the subprime mortgage loans were packaged and then sold into the global financial marketplace. I have previously noted (most recently here) that the subprime mortgage meltdown has led to a
In a prior post (here), I noted that one of the scarier aspects of the subprime lending mess is the widespread dispersion of mortgage investment risk across the economy. While companies holding mortgage-backed assets might well want to avoid recognizing any diminution of these assets’ valuation, an audit industry group, the Center for
In an earlier post (here), I discussed a recent case in which investors sued a subprime mortgage lender’s auditor, as one example of the ways in which aggreived parties may seek to impose gatekeeper blame on professionals for the subprime lending mess. A recent lawsuit filed against the prominent New York law firm
As the subprime lending mess has unfolded, one of the more interesting challenges has been trying to figure out where the subprime risk is. This query is not simply a matter of figuring out which financial institutions engaged in subprime lending (although this surely is part of the equation). The more complicated part of the