Is the legal pile-on just now starting? We're certainly seeing more big investors in MBSs and the derivatives built on those MBSs filing lawsuits against big banks.

The latest was Allstate, which has just sued Goldman Sachs, saying the gilded bank sold it roughly $120 million worth of MBSs that blew up. Allstate is seeking to be made whole on its investments with interest. The claims--that the bank misrepresented the safety of these securities--have become familiar. Allstate has also sued the likes of Morgan Stanley, JPMorgan Chase, Bank of America's Merrill Lynch and Citigroup.

We might be seeing more companies coming out of the woodwork to launch big suits. They perhaps were waiting to see if the government would bring an enforcement action again the bank, which would have turned up lots of evidence. Now, it's as if some aggrieved companies have decided that no government charges are likely, so they are proceeding. They have no doubt benefited from the massive amounts of information from previous probes that have been made public.

Thanks to such information, Allstate was able to state in its complaint that the securities it bought were referred to within Goldman Sachs as "junk," "dogs," "crap," and lemons." The big question here is how many more companies will file suits. It would appear that just about any buyer of MBS-based CDOs would have a case. We're seeing the pile-on effect also hit Bank of America.

For more:
- here's an article in Housing Wire

Related articles:
Piling on, AIG sues Bank of America over MBS  
Legal burdens over MBS continue to mount