NERA Insights
The ongoing credit crisis, described by former Federal Reserve Chairman Alan Greenspan as a “once in a lifetime tsunami,” is affecting markets and economies around the globe. NERA has created this area as a central repository of our current thinking on issues and developments relating to the crisis, including but not limited to litigation connected to all aspects of the crisis, bankruptcy and restructuring concerns, financial risk management issues, and the various regulatory and agency responses to the crisis. We invite you to check back often, as we will continue to update this section as events warrant.
Litigation
- Analysis of the Credit Crisis
- Subprime Lending
- Auction-Rate Securities
- Securities Class Actions
- Complex Commercial Disputes
Litigation
Examples of disputes that have already arisen include allegations of predatory lending, misrepresentation and omissions related to the valuation of the loans and the profits from selling or servicing them, suitability of investments, breach of contract related to loan servicing, and fraudulent conveyance issues. Litigation stemming from the crisis began in areas related to subprime lending, such as suits against issuers and lenders of mortgage-back securities, as well as ratings agencies, bond insurers, and asset management companies, but the range of litigation has expanded to include the commercial paper market, the leveraged buyout industry, and auction-rate securities, to name a few examples. As the write-downs continue to accumulate, additional types of lawsuits are expected.
Publications:
- Study of the Impact of Securitization on Consumers, Investors, Financial Institutions,
and the Capital Markets - How Did We Get Here? The Story of the Credit Crisis
- The Subprime Meltdown: A Primer
Publications:
- An Update on the Credit Crisis Litigation: A Turn Towards Structured Products and Asset Management Firms
- The Use of Economic Analysis in Predatory Lending Cases: Application to Subprime Loans
- Subprime Securities Litigation: Key Players, Rising Stakes, and Emerging Trends
- The Subprime Meltdown: Understanding Accounting-Related Allegations
- The Chilling Effects of the Subprime Meltdown (At A Glance)
Case Summaries:
- Analysis of the Performance of Subprime Portfolios in Servicing and Breach of Contract Litigation
- Teamsters Local 445 Freight Division Pension Fund, et al. v. Bombardier, Inc., et al.
- The Canary in the Coal Mine: NERA Experts Provide Damage Analysis in Support of Settlement of Class Action Involving a Subprime Mortgage Lender
- Student Loans and Student Loan Asset-Backed Securities: A Primer
- Auction-Rate Securities: Bidder's Remorse? (Primer)
- Deep Freeze in Auction Rate Securities (At A Glance)
Publications:
- Trends in Canadian Securities Class Actions: 1997-2008, Canada Strikes its Own Course
- Trends in Securities Litigation in Japan: 1998–2008
- Recent Trends in Securities Class Actions Litigation: 2009 Mid-Year Update
- 2008 Trends in Securities Class Actions: Annual Filings Are at the Highest Level in Six Years, Driven by the Credit Crisis, While Median Settlement Values Stay Steady
- 2008 Trends: Subprime and Auction-Rate Cases Continue to Drive Filings, and Large Settlements Keep Averages High
- Shareholder Class Actions and the Counterfactual
- Recent Trends in Shareholder Class Actions: Filings Return to 2005 Levels as Subprime Cases Take Off; Average Settlements Hit New High
Publications:
Enforcement
In recent years the SEC has imposed unprecedented penalties in its enforcement actions. NERA has developed a proprietary database of settlements in SEC enforcement actions by reviewing every litigation release and administrative proceeding document published from July 31, 2002 through March 31, 2009.
SEC Enforcement, Madoff & Ponzi Schemes
Publications:
- Ponzi Scheme Detection: How the SEC Can Catch the Next Thief
- SEC Settlements Trends: 2Q09 Update
- Clawbacks from Madoff Investors: Questions of Economics, Equity, and Law
- SEC Settlements Trends: 1Q09 Update
- SEC Settlements in Ponzi Scheme Cases: Putting Madoff and Stanford in Context
- SEC Settlements Trends: 4Q08 Update -- The Number of Settlements Decreased in 2008, but Median Settlement Values Nearly Doubled
- SEC Settlements: A New Era Post-SOX
Financial Advisory
For financial and non-financial firms alike, there is heightened interest in the role that effectively managing risk plays in aligning their strategic plans and capabilities with shareholder value. In response to the deepening credit crisis, companies that seek to remain viable and retain shareholder and employee trust must find new methods, best practices, and market solutions in order to meet the challenges of the increasingly changing risk landscape. Areas of focus for these efforts include compensation and benefits, credit risk, energy risk, insurance, integrated risk assessment, litigation risk, and cash flow risk.
Publications:
- The Fed's Expanding Playbook: Economists' Views
- Economists' Views: New Playbook for a Financial Crisis
- Paulson Proposal: An Update on Economists' Views
- Paulson Proposal: Economists' Views
- Buying the Bad Stuff: Implementation Considerations for the Paulson Plan
- Credit Ratings for Structured Products
Publications:
Valuing Complex Financial Instruments
Bankruptcy and Restructuring
Key concerns for entities affected by the credit crisis include analysis of market factors and what was reasonably known at the time of a transaction, determining fair market values of loan portfolio and other assets, conducting econometric analysis of defaults, assessing solvency and capital adequacy, examining fraudulent conveyance issues, performing deepening insolvency analysis, and forecasting what a company's future cash flows are likely to be, or what they would have been at an earlier point in time.
Publications:
