An Update on the Credit Crisis Litigation: A Turn Towards Structured Products and Asset Management Firms

Wed Jun 17 16:24:38 EDT 2009
Dr. Faten Sabry, et al.

Since the start of the ongoing credit crisis, financial institutions have taken over $1 trillion in credit losses and write-downs, 48 banks in the US have been taken over by the FDIC, and markets around the world remain highly volatile. The financial crisis, which first manifested in the subprime mortgage market, soon became a full blown credit crisis with unprecedented disruptions in financial markets around the world.

As the crisis has deepened, the allegations in and parties related to the resulting litigation have changed. During late 2006 and most of 2007, many of the suits were filed against lenders, originators, and home builders. However, as the crisis grew more severe, an increasing number of the suits have targeted asset management firms and involved complex financial instruments such as collateralized debt obligations (CDOs) and credit default swaps (CDS).

In this paper, NERA Senior Vice President Dr. Faten Sabry provides an update on the credit crisis-related securities litigation. The authors highlight emerging trends in a number of areas, including filings, percentage of cases involving directors and officers, types of defendants and plaintiffs, and recent decisions with emphasis on cases involving complex financial products such as CDOs and CDS.

This is the sixth installment of the NERA Insights series of articles dedicated to the analysis of the credit crisis (the others are available on the right-hand side of the page).