Consumer Law

Interesting Explanation for the Lesser Depression

By Jeff Sovern

Here's an interesting explanation for the current plight of our economy--which I've come to think of as the Lesser Depression--gleaned from the MP3 version of the ALI/ABA program The Subprime Mortgage Crisis: From A to Z.  One of the speakers in the panel titled "Class Actions and Shareholder Derivative Lawsuits Brought by Investors," after first suggesting that some lenders were overinsured for losses through credit default swaps, analogized to the situation in which the owner of a million dollar home insures it for five million.  The speaker then observed that it's not surprising when a fire breaks out at the home. The theory does explain why so many decisions that have since appeared to be self-destructive were made.  I suspect that it will ultimately not stand up to scrutiny, but that scrutiny may be coming in the form of litigation. 

Full post as published by CL&P Blog on December 03, 2008 (boomark / email).