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FT.com / US & Canada - Regulator's move risks opening lawsuit floodgates
The Securities and Exchange Commission's charges of fraud against Goldman Sachs could prompt a fresh wave of lawsuits by banks, insurance companies and investors that lost hundreds of billions of dollars on risky debts backed by subprime mortgages.

Numerous cases have already been filed related to losses on collateralised debt obligations - the debt instruments at the centre of the SEC's case against Goldman Sachs - as well as other investments related to risky US subprime mortgages.

The detailed allegations outlined by the SEC are likely to spur more lawsuits, and could also give existing cases a boost.
However, shares in some sectors rose, such as those insurance companies that have come close to collapse because they insured losses on such CDOs.

Bond insurers Ambac and MBIA and insurer AIG were the biggest providers of such insurance, offered in the form of credit default swaps - derivatives that pay out on default - on the CDOs. AIG's exposure to such losses required the US government to bail out the insurer and both Ambac and MBIA have filed ­lawsuits relating to losses on mortgage-backed securities.

"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Mon Apr 19th, 2010 at 03:07:25 AM EST
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