Thursday, June 30, 2011

Clash of Titans. The Barclays - Bear Stearns Case and the Current Financial Crisis

[Author: William V. Rapp, New Jersey Institute of Technology]

This paper is a focused analysis on the legal recourse investors in subprime mortgage vehicles might have against integrated originators, packagers and investment vehicle organizers in the mortgage process based on the resulting bubble and the economic aftermath of its collapse. It does this through the lens of a major civil case involving two financial giants, Barclay’s Bank and JP Morgan Chase the current owner of Bear Stearns. This approach is used because if a large well-financed plaintiff investor with a credible claim cannot make a good legal case against a participant controlling all aspects of the mortgage origination to investment chain it will be even more difficult with respect to smaller participants or those that worked with different or multiple participants in the chain on an arms-length-basis. In addition, the case offers an excellent perspective on the origins of the current crisis and how even sophisticated investors to their regret got caught up in the intricacies and complexities of the global mortgage backed securities market and related financial products.

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