The United States of Irresponsibility

When I was about 16 -- and voicing the entitled attitude typical to most 16-year-olds -- my mother told me something harsh yet true: "The world doesn't owe you anything simply because you exist." Ouch! Ever since then, I've tried to work hard to achieve things important to me, and am annoyed when I meet those whose mothers weren't as direct, because in the long run she was doing me a favor.

So now it seems that the finger-pointing in the general financial, mortgage and housing markets has started. In the great tradition of the U.S., this of course means lawsuits. From today's New York Times:

A wave of lawsuits is beginning to wash over the troubled mortgage market and the rest of the financial world. Homeowners are suing mortgage lenders. Mortgage lenders are suing Wall Street banks. Wall Street banks are suing loan specialists. And investors are suing everyone.

The legal and regulatory wrangles could dwarf the ones that followed the technology stock bust and the Enron and WorldCom debacles. But the size and complexity of the modern mortgage market will make untangling the latest mess even trickier. Some cases stretch across continents. Others are likely to involve state and federal regulators...

The legal battles stretch from Main Street to Wall Street and beyond. Homeowners and subprime mortgage lenders are squaring off in scores of cases that claim some lenders engaged in predatory lending practices and other wrongdoing. Cleveland and Baltimore are pursuing cases against Wall Street banks, saying local residents are suffering because the banks fostered the proliferation of high-risk home loans...

Securities lawyers say cases involving mortgage-backed securities, which were generally sold privately to sophisticated institutional investors, are far more complicated than those involving stocks, which were sold publicly to everyday investors. Class-action lawsuits, a favorite tool of plaintiffs’ attorneys, will be employed less than they were after the plunge in technology stocks a few years ago because mortgage securities tend to vary in composition and disclosure.

“This is going to be much more complicated to prove, and it’s going to be case by case as opposed to class-actions,” said David J. Grais, who is a partner at the Grais & Ellsworth law firm in New York and an author of a recent paper on the legal liabilities of credit ratings firms. “This resembles the S&L crisis in the ’80s much more than it does the tech bubble in the ’90s.”

I've heard others compare these days to the S&L crisis os the 1980s, which makes me wonder if we can expect another RTC-type bailout.