Seattle Times (02/19/08); Jewell, Mark
The housing bust could become very costly for Wall Street as cities sue investment banks and big lenders to recover damages on mortgage loans, as regulators pursue allegations of violations of state securities laws and as the FBI looks into possible criminal activity with regard to what firms knew about the risks of mortgage securities backed by subprime loans. Wall Street is unlikely to be hit with huge financial penalties in civil cases, but investigations could reveal questionable mortgage-finance practices that could lead more private investors to file lawsuits. John Akula, a business-law lecturer at the Massachusetts Institute of Technology's Sloan School of Management, says increased scrutiny tends to reveal dubious practices. David Bizar, a Hartford, Conn., attorney who has defended the industry in subprime-mortgage lawsuits, believes the mortgage problems are more the result of bad business decisions than fraud.
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