Legal Causes & Consequences Of Credit Crisis

If you’re interested in legal aspect of securities , the SEC, mortgage backed securities, and the credit crisis. Read this Harvard Law Paper. Click Here To Read About Legal Causes And Consequences Of Credit Crisis

Article Introduction (Via Harvard Law School)

The paper surveys the current securities class action litigation arising out the credit crisis and some of the important securities law principles that will be at play in the resolution of this litigation. In particular, we focus on the following three securities law principles in our discussion: (1) no fraud by hindsight; (2) truth on the market defenses; and (3) loss causation issues.

We also provide in the paper data on, among other things, the tranche structure of mortgage-backed securities, securitization deal sizes, reported value at risk estimates by banks, CDO liquidations and CDO trustee information.

Article Abstract (Via SSRN)

This paper explores the economic and legal causes and consequences of the 2007-2008 credit crisis. We provide basic descriptive statistics and institutional details on the mortgage origination process, mortgage-backed securities (MBS), and collateralized debt obligations (CDOs). We examine a number of aspects of these markets, including the identity of MBS and CDO sponsors, CDO trustees, CDO liquidations, MBS insured and registered amounts, the evolution of MBS tranche structure over time, mortgage originations, underwriting quality of mortgage originations, and writedowns of the commercial and investment banks. We discuss the financial difficulties faced by investment and commercial banks. In light of this discussion, the paper then addresses questions as to whether these difficulties might have been foreseen, and some of the main legal issues that will play an important role in the extensive litigation (summarized in the paper) that is underway, including the Rule 10b-5 class-action lawsuits that have already been filed against the banks, pending ERISA litigation, the causes-of-action available to MBS and CDO purchasers, and litigation against the rating agencies. In the course of this discussion, the paper discusses three principles that will likely prove central in the resolution of the securities class-action litigation: (1) “no fraud by hindsight”; (2) “truth on the market”; and (3) “loss causation.”

Click Here To Read About Legal Causes And Consequences Of Credit Crisis