A developing breakdown in an obscure corner of the credit-market involving debt instruments called “auction rate securities” could represent the latest threat to emerge from the credit crisis. According to news reports (here and here), the absence of buyers for these securities has caused several recent auctions to fail, forced isuers
About Those Subprime D & O Loss Estimates
Over the past several weeks, several industry observers and analysts have tried to put a number on the insurance industry’s aggregate subprime-related loss exposure. At one end, Bear Stearns on January 24, 2008 estimated the industry’s exposure at $8-9 billion (refer here). By contrast, on February 8, 2008, Lehman Brothers estimated (here)
Subprime Litigation Risk: Outside the Financial Sector?
As I have previously noted (here), securities backed by subprime and other residential mortgages are not just held by financial companies. A wide variety of companies invested in these securities in order to try to improve their return on cash and short-term investments. As the credit markets have deteriorated, many of these investments
Expanded Subprime Litigation Wave Hits Sallie Mae
In a prior post (here), I noted that the subprime meltdown story is no longer just about subprime, and that the crisis spreading to other types of credit could stretch the subprime litigation wave to areas outside of subprime. The lawsuit filed today against SLM Corporation (better known as "Sallie Mae")
Subprime Tsunami Time
Since I first began chronicling the subprime litigation wave in April 2007 (here), the wave has gained amplitude and speed. But a spate of recent subprime-related litigation developments, seemingly unrelated, suggest that the litigation wave’s magnitude has crossed a significant threshold. Things seemingly have changed, decidedly for the worse.
The first development that
Subprime Litigation Wave Hits National City Corporation
On January 22, 2008, National City Corporation, a Cleveland-based bank holding company, announced (here) a fourth quarter loss of $333 million, including a write-down of $181 million on its mortgage business and a $691 million provision for credit losses. On January 24, 2008, the company was hit with a securities class action
Subprime Litigation and Politics: A Volatile Mix
In response to the developing credit crisis, politicians have proposed legislative fixes and, more recently, advocated the need for fiscal stimuli. Some politicians of a more aggressive cast have launched investigations (about which refer here). In this environment, it is hardly surprising that other politicians are also resorting to litigation – and not merely
“CDO Squared” Securities Lawsuit Hits MBIA
On January 11, 2008, MBIA became the latest bond insurer to be named as a defendant in a subprime-related securities class action lawsuit. Bond insurers ACA Capital Holdings (about which refer here), Security Capital Assurance (refer here) and Radian Group (refer here) have previously been named in subprime-related securities lawsuits. MBIA is
Subprime Litigation Wave Hits State Street
On January 3, 2008, State Street Corporation announced (here) that for the fourth quarter of 2007, it will be establishing a reserve of $618 million, on a pre-tax basis, "to address legal exposure and other costs associated with the underperformance of … fixed-income strategies managed by… the company’s investment management arm." The net
A Closer Look at the 2007 Subprime-Related Securities Lawsuits
In its 2007 year-end study of securities class action trends (here), NERA Economic Consulting noted that the "sharp increase" in 2007 securities lawsuit filings was "driven in part by litigation related to subprime lending," an observation I have also noted elsewhere. Given the importance of the subprime lawsuit filings to the overall