Unprecedented banking and financial company failures and hastily arranged buyouts by regulators to avoid insolvencies have left the financial markets reeling. The Federal Reserve and the Treasury Department formulated bailouts of companies once thought solid. Congress wrangled with the $700 billion rescue package to avert further disaster. Stockholders of once-steady entities such as Washington Mutual, Wachovia, or AIG find investments lost, and some on the brink of retirement discover that their nest eggs have shrunk by 25 percent or more. As the affected masses search for people to blame and assets to tap, suits against directors, officers, accountants, and even loan agents and appraisers continue to mount.

Given the more than $230 billion in write-downs from the subprime mortgage crisis in the first half of 2008, an inevitable barrage of litigation ensued. During the first three months of 2008 alone, 170 subprime-related lawsuits were filed in Federal Court. Nearly half of these suits were filed in New York and California. One half of the lawsuits involved putative class actions by borrowers versus lenders and mortgage brokers alleging (among other things) discriminatory lending practices, improper charges, and inadequate disclosures.

In January 2008, Bear Stearns estimated that directors and officers (D&O) insurers may face $9 billion in claim-related costs. Bear Stearns' own officers and directors were subject to a suit against them, which was filed within hours of the announced bailout sale to J. P. Morgan (Eastside Holdings, Inc. v. Bear Stearns). Other subprime-related securities lawsuits have been brought against AIG, Citigroup E-Trade Financial Corp., HSBC Holdings, Movies Company, Toll Brothers, and Washington Mutual, Inc. Of the many cases filed in the past year, almost all of them name individual directors or officers as defendants.