In the wake of the housing and subprime meltdown, companies face unprecedented legal exposure ranging from regulatory and criminal investigations to private litigation.
To put this situation into historical perspective, the savings-and-loan crisis of the late 1980s and early 1990s ultimately cost an estimated $160 billion and affected more than 1,600 U.S. banks insured by the Federal Deposit Insurance Corp. It was one of the worst financial scandals in history. But the S&L crisis, while costly, was limited to only a section of U.S. financial institutions. In contrast, the breadth and the depth of the subprime mortgage crisis will likely far exceed that of the S&L crisis. Standard & Poor’s has estimated that losses from securities linked to subprime mortgages will exceed $265 billion as financial institutions worldwide write down the value of their holdings. And the breadth and depth of regulatory investigations and private litigation, as discussed in this column, is unprecedented.
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