I believe it was and is only a matter of time.  An article yesterday reported that Washington Mutual is suing the Federal Deposit Insurance Corp for over U.S.$13 billion in connection with the loss of its banking operations acquired by JPMorgan Chase & Co.  The suit alleges the FDIC made a “cryptic (i.e. hidden or disguised) disallowance” of Washington Mutual’s claims, and that it (acting as receiver) agreed to an unreasonably low price when arranging the $1.9 billion sale of Washington Mutual’s banking business to JPMorgan last September.  Seattle-based Washington Mutual, which had about U.S.$307 billion of assets, is the largest U.S. lender to fail – so far.

From September, when Lehman wasn’t ‘bailed-out’ and wealth subsequently eroded, I have believed it only a matter of time until both individual and class action lawsuits are filed by U.S. companies and individuals who believe they have been damaged by private sector activity that lead to the present economic collapse, inconsistently treated and damaged by the public sector through the implementation and administration of the various ‘bail-out plans’ and ‘stimulus packages’, or both. I don’t think I’m wrong, and suggest readers watch as U.S. legal suits escalate if I am right. Given the events of the past years and months, combined with the propensity of Americans to sue, I think the opportunity for propsective litigation is enormous  Types of lawsuits I think may be pursued – particularly if the economy continues to deteriorate – includes litigation against:

•    executives and former executives of both investment banks and failed companies who received egregious bonuses, the companies that employed them, and the Directors that approved those bonuses;

•    the banks and hedge funds that participated in the ‘free money’ schemes that almost certainly will become the ‘stuff of legend’;

•    the investment bankers, investment advisors, and economists who failed to recognize, earlier than it will be alleged they ought to have, the investment risk that existed in conventional diversified portfolios given (among other things) the escalated U.S. house prices, the propensity of U.S. consumers to borrow against them, and the rapidly changing globalization and the resultant U.S. dependence on it is trading partners for the ‘American lifestyle’; and,

•    the U.S. Government for (among other things) diluting shareholder interests in what will be alleged to be an inappropriate manner.

If you are a litigator in the U.S. you likely walk around today with a supercilious smile, believing (if not knowing) you are going to be as busy as you want to be over the next 10 – 15 years.  Typically the biggest winners in litigation matters are the litigators.  In my view, ‘litigation diversion’ from working positively to get the U.S. economy back on track and the U.S. consumer spending again is not something the U.S. can afford at the moment.

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