Where is the tsunami of litigation?
Anyone who has read history or who is sufficiently chronologically enriched to remember previous panics, meltdowns and financial crises can tell you that financial shenanigans always generate work for lawyers. The questions are:
When will the work start? Who will get to do it? How long will it last?
WHEN WILL THE WORK START? In a recent story about litigation layoffs, which are unexpected in this kind of market meltdown, a partner was quoted as expecting a tsunami of litigation which hadn't yet materialized.
Lehman Brothers collapsed exactly 30 days ago. Frankly, anyone who had expected a tsunami of litigation to begin by now is operating on the widely discredited Raman Noodles Principle of Practice Development. If the Giant Pile of Mortgage Backed Securities is in limbo, the depth and breadth of the economic problem is yet to be clearly identified, and the theories of fault and blame are still being developed, it is hardly likely that a tsunami or even a big wave of litigation could have begun.
WHO WILL GET TO DO IT? Part of that is being sorted out at the highest level of BigLaw and BigGov. In the end, however, each and every individual mortgage backed security and the underlying actual mortgages that have been enveloped by smoke and mirrors, will be wrestled back to reality by junior associates or cadres of lawyers hired by as-yet-undesignated-government entities. There will be work and there will be a lot of it.
HOW LONG WILL IT LAST? The savings and loan crisis of the 1980s was finally wrapped up in the mid-1990s when the Resolution Trust Corporation's duties were transferred to the FDIC. Yes, I know that the financial structures are different in today's financial meltdown, but I have no reason to believe that the tail of this problem will be any shorter than the RTCs.