The 18-month decline in shareholder class action filings has reversed course, with 2007 federal filings projected to increase by 58 per cent compared to the previous year, And subprime is driving a lot of it.
Bonuses might be down but the subprime mess has not stopped the party on Wall Street. Despite the market turmoil and investors suffering their biggest declines since 2002, year-end bonuses still climbed 14 percent and CEO salaries jumped 23 per cent.
What impact will subprime have on the US economy? Are the dangers over-stated? Or is the OECD right when it warns that the losses could flow into hundreds of billions of dollars?
Investors might have lost a fortune with Wall Street's top banks writing off billions in trading losses related to the credit crunch. But the ones who are really cleaning up are the financial professionals who are set to take home record bonuses this year.
The subprime mess is just one example of what happens in a bubble. And now evidence suggests that bubbles are created by people just wanting to keep up with the Joneses. Investors fear being poor when everyone around them is rich.
How did we get into the subprime mess? It’s all about a corrupt system that handed out mortgage broker licences like driver's licences, and then handed out mortgages like candy at Halloween.
Leon Gettler is a blogger and senior business journalist at The Age, specializing on management issues. His latest book, Organisations Behaving Badly focuses on the forces that lead smart executives into making dumb decisions.
