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Business News Headlines to Jan 16 2008

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Tuesday Newspaper Review - Irish Business News and International Stories
Principal news stories from the Irish Times, Irish Examiner, Financial Times and New York Times.

The Irish Independent had not been updated online at the time of this posting.

The Irish Times reports that investors in Europe's leading companies lost more than €240 billion yesterday as global stock markets crashed amid fears that the world is plunging into a recession.

The value of companies listed on the Dublin Stock Exchange plummeted by 4.17 per cent, roughly €3.6 billion, as panic spread through Europe from Asia, where the fear-driven sell off began on Monday morning.

Reports estimated that losses on blue chip indices of Europe's biggest public companies amounted to $350 billion (€242 billion). It was the biggest one-day fall on European stock markets since the terrorist attack on New York's World Trade Center in September 2001.

Yesterday, dealers in Dublin pointed to over four million shares being sold in Allied Irish Bank and almost six million in Bank or Ireland as evidence that investors were dumping equities.

"It's a complete meltdown, everybody just wants cash," one trader told The Irish Times.

In Frankfurt, one of Europe's main financial hubs, a dealer said there was complete panic on Germany's stock exchange.

"It's a classic crash," he added.

The Morgan Stanley Capital International (MSCI) index, which tracks the value of all stocks on developed world markets, plunged 3.3 per cent, finally wiping out gains made by equities over the last year.

Since the beginning of the month, its value has fallen by 12 per cent.

Irish workers will be directly affected by a drop in the value of their pensions, most of which include share investments pegged to national and international indices such as the Iseq index of Irish shares and the MSCI.

The FTSE Eurofirst index, which benchmarks Europe's top investments, dropped 5.8 per cent, taking its year-to-date losses to 15 per cent. In London, the FTSE index shed 5.6 per cent.

Fears that the US is about to slip into recession and take the rest of the world with it sparked yesterday's crash. The problems faced by the US stem from the fact that a large number of its banks fuelled a credit bubble by giving mortgages to individuals with bad credit histories, who would normally be judged high risk, prompting the so-called sub-prime lending crisis.

The value of the homes against which the loans were given began to fall last year and many of them defaulted. US banks now fear that the problem is spreading through the system to other forms of credit.

Last week, US president George W Bush proposed a $140 billion package to stop the slide into recession but stock market analysts said yesterday that investors do not believe it is enough.

Economist, Jim Power of Friends First, predicted that the US and European central banks would have to begin cutting interest rates "aggressively" this year. This would ease mortgage and other borrowing costs.

"The Fed (US central bank) could cut rates by as much as 1 per cent," he said. "The European Central Bank is going to have no choice but to cut rates as well."

Mr Power warned that the Republic is facing into a tough year.

"International investors fell out of love with the Irish economy a year ago, if you superimpose the negative global outlook and stock market turmoil on that, it will further undermine confidence," he said.

"We are facing a very challenging year at least," he said. "But we have got to remember that the world economy will emerge from this in 12 to 24 months and we have to prepare for that by restoring some of our damaged competitiveness.

"We need to continue to address our infrastructure deficit, the Government cannot let up on the National Development Plan, we have to control current spending, and there has to be wage restraint, in the private and public sectors."

The Irish Times also reports that this week could mark the end of the bull market for Wall Street, with US stocks likely to join a global equity market plunge triggered by fears of a US recession.

Growing fears of a US recession and increased worries about the outlook for the financial sector triggered a rout in Asian and European equity markets yesterday.

Many indices suffered their biggest one-day declines since September 2001.

Wall Street was closed for the Martin Luther King Jnr Day holiday, although the futures market pointed to steep losses for the S&P 500 and Dow Jones Industrial Average when trading resumes today.

Investors said last week a $150 billion White House rescue plan was too little too late, as more and more data signalled the US economy was headed for recession.

If US stocks open at the levels futures were indicating, it would push major indexes dangerously close to bear market territory - or a 20 per cent drop from their peak in October. That would mark the death of the bull market that was born in early October 2002. The turmoil comes as a group of the world's leading economic commentators gather at Davos in Switzerland to discuss global finance, economics and business.

A year ago at the same forum, Jean-Claude Trichet and Lawrence Summers accurately warned investors about being too complacent. Now they see an erosion of confidence that threatens to paralyse the global economy. Former US treasury secretary Mr Summers returns to Davos this week urging quick action in the form of economic stimulus to head off "a cascading loss of confidence" in the US economy after the collapse of its housing market.

European Central Bank president Mr Trichet, also travelling to the Alpine retreat, is leading international colleagues in lending emergency cash to banks.

"When you have recessions from bubbles bursting, they tend to be protracted," said Mr Summers, a Harvard economist and the university's former president.

"There is the possibility, not yet at all the probability, that a recession could prove long and severe."

As the hubris that Mr Trichet and Mr Summers decried last year is replaced by alarm, an aversion to risk-taking may worsen the outlook for the world economy.

"Davos was marked last year by an irrational exuberance," Josef Ackermann, chief executive officer of Frankfurt-based Deutsche Bank AG, Germany's largest bank, said yesterday.

"I hope that we don't swing to the opposite this year and give in to an irrational depression."

In the past 10 days, Citigroup cut 4,200 positions after its biggest quarterly loss ever, German investor confidence fell to the lowest level since 1992 and the first signs emerged that China's economy may be slowing.

The Irish Examiner reports that fears of a full-blown US recession gripping the US caused havoc across markets yesterday as analysts forecast grim times ahead.

Though US markets were closed yesterday for the Martin Luther King holiday, analysts warned the economy was in a “bear market” implying share values across the key indices including the S&P 500 and the Dow Jones will fall 20%-25%, while the economy goes negative in terms of growth.

A bear market means the US will go though a serious loss of confidence resulting in falling economic growth.

Markets tumbled yesterday despite Friday’s announcement by US President George W Bush of a rescue package worth $140 billion (€100bn) to boost the economy.

Involved is a series of short-term tax cuts.

No details were given but it is understood to include tax breaks for businesses and individuals worth at least 1% of the nation’s GDP, or approximately $140bn to $150bn.

At the end of January the US Federal Reserve will announce a cut of 0.5% on top of the 0.75% rate cuts introduced since last September.

That will bring rates to 3.75% while the Fed is expected to slash rates to as low as 3% to ensure the economy avoids recession.

Pessimism won out yesterday and the rout on the European markets saw between 5% and 6% wiped off the value of European stock markets.

Deep fears persist that the subprime mortgage crisis is still a huge negative for the economy, with estimated bad debts put at a staggering $400bn-plus by more pessimistic market watchers, including David Roche.

A graduate of Trinity College, Mr Roche is a founding partner of London-based Independent Strategy. He warns the full implications of the global lending spree of the past decade or more is a blot on the global banking system which is about to pay a very heavy price for this credit binge.

Central bankers, including the former chairman of the US Federal Reserve, Alan Greenspan, are hugely culpable for the current credit and stock market crisis now threatening the global economy.

Bond insurers exposed to the billions of this subprime lending are now in deep trouble, he warned.

Apart from the bad debt carnage still to hit, the end result will be much tighter credit and constraints on the US for some time, Mr Roche told Bloomberg yesterday.

However not all of the analysts are pessimistic.

In a timely analysis Simon Barry, senior economist, Ulster Bank Capital Markets said the pessimists have got it wrong.

He rejects the view the US will go into recession.

Housing constitutes just 5% of GDP while services account for 84% of employment and about 80% of the economy.

Given the credit issues, growth has to slow but the doomsday scenario is overdone and the services will continue to deliver as the Fed cuts rates to 3.25%, he said.

Closer to home inflation fears will prevent the ECB from cutting rates unless growth slows sharply, he said.

Expect the euro to hit $1.50 as the Fed cuts rates, with $1.55 a distinct possibility.

The Financial Times reports that lenders’ struggles to raise funds and the growing gloom over house prices drove gross mortgage lending to its lowest level since May 2005 last month, figures from the Council for Mortgage Lenders showed on Monday.

The CML said gross mortgage lending fell to £22.6bn in December, 21 per cent below the same month the previous year and 25 per cent below November’s lending volumes.

The housing market is usually quiet towards the end of the year, but lending volumes would typically fall only 6 per cent in lending between November and December, the CML said.

The CML’s members undertake about 98 per cent of UK residential mortgage lending, and its figures are viewed as an early indication of housing market activity.

Michael Saunders, economist at Citigroup, said it was the first time in recent years that mortgage lending had undershot its five-year average of £24.2bn for December, adding that more detailed data published next week by the Bank of England were likely to be “very weak”.

The drop in lending volumes comes as little surprise, after a survey from the Royal Institution of Chartered Surveyors showed rising stocks of unsold property and confidence in the housing market at its lowest ebb since the early 1990s.

It also gives a concrete illustration of the difficulties lenders face in raising funds to provide loans for homeowners, while the market for mortgage-backed securities remains in effect closed.

Industry groups have warned that lenders could be forced to slash lending to households if the government does not help to kickstart the securitisation industry.

Building societies face no such constraints, as they fund mortgage lending largely from savings deposits, and are benefiting from a flood of savers transferring deposits from Northern Rock.

The Building Societies Association said on Monday that savings inflows nearly doubled to a record £16.1bn in 2007, largely because of Northern Rock but also because households worried about a slowing economy were starting to put more cash aside.

Adrian Coles, the BSA’s director general, said building society branches were reporting some customers choosing to save more and others deciding to cash in some investments.

The speed of the slowdown in housing market activity, coupled with evidence that households are starting to save, will heighten fears of a consumer slowdown

“When the housing market last slowed in 2004/05, the monetary policy committee argued that the link between the housing market and consumer spending had weakened,” said Vicky Redwood at Capital Economics. “In the event, the link proved to be fully alive and well – and could be even stronger during this housing downturn.”

The FT also reports that the French labour market is on the brink of a revolutionary change that could start delivering real benefits to the economy as early as 2009, according to Laurence Parisot, head of the country’s powerful employers federation, Medef.

In an interview with the Financial Times, Ms Parisot hailed the labour market reforms signed by unions and employer federations on Monday as historic and rejected criticism that the deal does not go far enough to bring real change to France’s flagging economy. Moreover, she argues, the accord marks a new era in France’s often tortured labour relations, for decades characterised more by conflict than negotiation.

“It is so new that many people struggle to see the newness of it,” she said. “But by its mere existence, the accord is revolutionary. For the first time there has been an agreement between employers and unions on something that concerns the economy.” 

Ms Parisot said measures introducing more flexible labour contracts for companies and greater protection for workers would help to accelerate the fall in France’s punishing rate of unemployment from 8 per cent today to 5 per cent  by 2010-2011. If the deal was implemented as agreed, the difference in joblessness would be “perceptible in 2009”, she said. However, she warned that it was now up to the government and French parliament to ensure that the accord was passed into law intact.

France’s five biggest trade unions and the three main employer federations spent four months negotiating the reform in a race to meet the timetable set by President Nicolas Sarkozy, who had threatened to legislate if agreement could not be reached by this month.

Promise of a first lady who works

The transformation that Laurence Parisot predicts for French society could extend to France’s “first lady”, if President Nicolas Sarkozy marries Carla Bruni, the Italian model and singer, the Medef boss says.

“If she becomes the first lady of France, she will be the first wife of a president of the Republic that works for a living,” Ms Parisot said. “It is a major change in society and a terrific one,”

Ms Bruni is to relaunch an album sung in English with lyrics from W. B. Yeats, which promises to do well in France, helped by the notoriety of her romance with Mr Sarkozy, recently divorced from his second wife Cecilia.

In France, first ladies have traditionally devoted themselves to charitable work, as did Danielle Mitterrand, or their husband’s political career, like Bernadette Chirac. By comparison, in Britain, former leader Tony Blair’s wife Cherie pursued a successful legal career.

Working women are by far the norm in France. But its poor record on promoting women led to legislation last year to force companies to show by 2010 that they are suppressing wage inequality. A study by the World Economic Forum ranked France at 51 in gender-equal countries, against 11 for the UK and 31 for the US.

The deal allows companies to separate from their employees by mutual consent, but in return gives those workers access to unemployment benefits. It enables companies to hire workers for a fixed project and allows employees to take certain health and training entitlements with them, as well as enhanced unemployment payments for the lowest paid, if they lose their jobs.

But critics say the wider access to social benefits will only increase the deficit of a creaking social system while the new contracts do not introduce enough flexibility for companies. Even government officials have admitted that the reforms are not revolutionary.

Ms Parisot argues that this ignores two fundamental elements: first, that France’s commitment to the International Labour Organisation’s convention on termination of employment had limited the scope of reform. It can be no coincidence, she says, that countries with the most flexible labour markets, such as the UK, Ireland and the Netherlands, have not signed the convention.

Second, Ms Parisot said, employers and unions had shown a new level of maturity in pursuing negotiations to the very end. “There was a conviction on both sides that we couldn’t let the dysfunctionality of the labour market continue,” she said. Even the communist-backed CGT, France’s biggest union and the only one to withhold its signature, abandoned its traditional hostility and contributed proposals, she said.

This bodes well for further reform, she says. “Our labour code and social thinking is founded on the idea of inequality between employees and their employers. This agreement signifies that between the [two] there is a relationship of equality.”

Even as Ms Parisot spoke from Medef’s headquarters in Paris, the unions that signed the deal were preparing for a strike this week to press for wage rises.

Still, she is not daunted. “You do not change 100 years of conflict in 30 minutes. People will see in the next two to three years that things have really changed, even if there will be traces of the old culture in the coming months. But I am convinced these are the last traces.”

The New York Times reports that fears that the United States may be in a recession reverberated around the world on Monday, sending stock markets from Mumbai to Frankfurt into a tailspin and puncturing the hopes of many investors that Europe and Asia would be able to sidestep an American downturn.

Until now, overseas markets had largely avoided the sell-off that has caused steep declines recently in the United States, whose markets were closed in observance of Martin Luther King’s Birthday. But investors reacted with what many analysts described as panic to the multiplying signs of weakness in the American economy.

And in a sign that the United States could join the sell-off on Tuesday, trading in stock index futures pointed to a substantial decline when markets reopen on Wall Street.

The angst about the United States belies the popular theory that Europe and Asia are not as dependent on the American economy as they once were, in part because they trade more with each other. The theory, known as decoupling, has been used to explain why economies like China and Germany have kept growing robustly, even as the United States has slowed.

“The market is not at all convinced about decoupling, and I think the market is probably right,” said Thomas Mayer, the chief European economist at Deutsche Bank in London. “When you look at it more closely, we’re suffering from the same issues.”

The stock sell-off was evenly distributed from east to west, with indexes plunging in London, Paris, Frankfurt, Tokyo, Hong Kong, Seoul and Mumbai. The DAX index of the Frankfurt Stock Exchange plummeted 7.2 percent, its steepest one-day decline since Sept. 11, 2001. The 7.4 percent drop in the Sensex index in Mumbai was the second-worst single-day tumble in its history.

Stocks followed suit when markets opened in the Western Hemisphere. Canadian stocks were down nearly 5 percent, and a key market index in Brazil was off 6.6 percent.

The decline continued in early trading Tuesday in Asia with some indexes down more than 4 percent.

Shares of banks led the decline in many countries, underscoring that the subprime mortgage crisis continues to hobble the global financial system. On Monday, a German state bank, WestLB, said it would report a loss of $1.44 billion in 2007 because of its exposure to deteriorating mortgage assets.

“There is indeed some panic,” Mr. Mayer said. “What we’re seeing, in Europe and Asia, is that the markets are pricing in a recession.”

Investors were scarcely comforted by President Bush’s announcement on Friday of an economic stimulus package of as much as $145 billion. Mr. Bush’s “shot in the arm,” economists said, did not persuade the rest of the world that the United States will escape a recession, or that it will either.

In reference to the global stock sell-off, Jeanie Mamo, a spokeswoman for the White House, said: “We don’t comment on daily market moves. We’re confident that the global economy will continue to grow and that the U.S. economy will return to stronger growth with the economic policies the president called for.”

The turmoil will put even more pressure on the European Central Bank, which has charted a different course from the Federal Reserve by warning that it might raise interest rates to curb inflation, rather than cut them, as the Fed has, to ward off a recession. Mr. Mayer and others predict the bank will be forced into an about-face in coming months.

While Asia has been less buffeted by the credit crisis than Europe, the Bank of China now appears vulnerable, with analysts predicting it will have to write down the value of its American mortgage holdings.

Investors in Asia have been in a state of denial about a possible recession in the United States, said Adrian Mowat, JPMorgan’s chief strategist in Asia. But now, he said, many believe “there’s no debate about it.” The only question, he added, is “how long and deep” a recession might be.

In Japan, which may be facing a new recession of its own, most indexes were off by more than 3 percent.

In Europe, the housing market, after a long boom, is cooling, especially in Britain, Spain and Ireland. That will depress the growth rate in those countries, which are among the region’s economic pace-setters.

European banks continue to make unwelcome disclosures about write-downs of mortgage assets, even if the losses are not as dire as those reported by Citigroup or Merrill Lynch. Bank loans across Europe are being constrained, according to a recent survey by the European Central Bank.

German banks, in particular, are still haunted by the American subprime crisis. The troubles of WestLB came a week after a German property lender, Hypo Real Estate, lost a third of its market value after it disclosed higher-than-expected losses from the credit crisis.

WestLB, after warning that its 2007 losses would be more than twice its earlier estimate, said its biggest shareholders, the state of North Rhine-Westphalia and regional savings bank, had agreed to inject up to 2 billion euros ($2.9 billion) of fresh capital into the bank to stabilize it.

Also on Monday, Commerzbank warned it would make additional write-downs in the fourth quarter of 2007. This caught analysts off guard because Commerzbank has been fairly upbeat about its exposure.

“The amounts are not so significant,” said Simon Adamson, an analyst at CreditSights, an independent research firm in London. “It was more the way the market was caught by surprise.”

Shares of Commerzbank fell 10 percent Monday, Deutsche Bank declined 6.7 percent, Société Générale of France dropped 8 percent, BNP Paribas decreased 9.6 percent and the ING Group of the Netherlands fell 10.5 percent.

But the damage extended to the shares of energy companies like BP and Royal Dutch Shell, which dropped on worries that a global economic slowdown would crimp the demand for oil and gas.

“The problem is more deeply rooted in anxiety about the global economy than it is in Germany,” said Boris Boehm, an asset manager at Nordinvest in Hamburg. “People are really afraid. But it’s a good thing because fear, along with action, gets the market to its proper level quickly.”

Those jitters extended to fast-growing markets, like China and India, that are thought to be relatively insulated from the United States. The Shanghai composite index, which had risen nearly 88 percent in the year through Friday, closed down 5.1 percent on Monday, while Hong Kong’s Hang Seng fell 5.5 percent, also the most since Sept. 11, 2001. It had been up 24 percent in the year through Friday.

While emerging markets may have been poised for a drop after their run-up, the rout on Monday may also signal a basic shift in sentiment, analysts said. Mr. Mowat of JPMorgan said that it did not matter whether markets were separated by geography or asset class because, he said, “we trade together in corrections.”

No matter how many bridges, roads, and power plants China builds, or how many new cars India sells, a downturn in the United States will ripple across the economies of Asia, experts said.

“If the United States consumer quits buying things, it is going to hurt in Asia,” said Deborah Schuller, an Asia regional credit officer for Moody’s Investors Service. She said most rated corporations there would be able to withstand a nine-month recession in the United States, but if it were to stretch to 12 months or more, there could be some serious problems.

Worries about China are adding to Asia’s uneasiness. Its private property market is in the midst of a shakeout, and scores of small developers have gone out of business.

In both Asia and Europe, there may be further shocks as banks tally the fallout from their investments in the American mortgage market. Deutsche Bank, for one, will report its annual results on Feb. 7.

“There’s an old saying in the market that banks lead us into recession and banks lead us out,” Mr. Boehm of Nordinvest said.

The NYT also reports that everyone wants to know who is to blame for the losses paining Wall Street and homeowners.

The answer, it seems, is someone else.

A wave of lawsuits is beginning to wash over the troubled mortgage market and the rest of the financial world. Homeowners are suing mortgage lenders. Mortgage lenders are suing Wall Street banks. Wall Street banks are suing loan specialists. And investors are suing everyone.

The legal and regulatory wrangles could dwarf the ones that followed the technology stock bust and the Enron and WorldCom debacles. But the size and complexity of the modern mortgage market will make untangling the latest mess even trickier. Some cases stretch across continents. Others are likely to involve state and federal regulators.

“It will be a multiring circus,” said Joseph A. Grundfest, a professor of law and business and co-director of the Rock Center for Corporate Governance at Stanford. “This particular species of litigation will be manifest in many different types of lawsuits in many different jurisdictions.”

The legal battles stretch from Main Street to Wall Street and beyond. Homeowners and subprime mortgage lenders are squaring off in scores of cases that claim some lenders engaged in predatory lending practices and other wrongdoing. Cleveland and Baltimore are pursuing cases against Wall Street banks, saying local residents are suffering because the banks fostered the proliferation of high-risk home loans.

Two questions lie at the heart of many of the cases. The first is whether lenders and investment banks alerted borrowers and investors to the risks posed by subprime loans or securities backed by them. The second is how much they were legally obliged to disclose. “Those are the two issues that are frequently raised,” said Jayant W. Tambe, a partner at the law firm Jones Day.

As defaults and foreclosures rise, the various players in the housing market are all pointing fingers at each other. State prosecutors like Andrew M. Cuomo, the attorney general of New York, are investigating whether investment banks that packaged mortgages into securities disclosed the risks to investors and credit ratings agencies. Investment banks, in turn, are accusing lenders and mortgage brokers of shoddy business practices.

“What strikes me here is that this a tainted system from A to Z,” said Tamar Frankel, a law professor at Boston University. “Everybody blames everybody else. If you look at what is being said, there isn’t one who doesn’t blame another and there is half-truth in everything.”

Wall Street banks that sold mortgage investments around the world face legal complaints from as far away as Australia and Norway. Lehman Brothers, the Wall Street bank with the biggest mortgage business, is being sued by towns in Australia that say a division of the firm improperly sold them risky mortgage-linked investments. Lehman has denied the charges and has said the unit, formerly known as Grange Securities, acted properly.

Closer to home, members of a New Jersey family have sued Lehman for $4.14 billion, saying the firm steered them into complex securities that have become difficult to sell, Bloomberg News reported Friday. Lehman denied the accusations.

In the United States, Lehman is suing at least six mortgage lenders and brokers like Fremont Investment and Loan and the Fieldstone Investment Corporation, claiming they sold Lehman dubious loans. Lehman claims that borrowers’ incomes were overstated, appraisals were inflated and the homes were in poor condition. In most cases, the lenders are fighting the allegations and Lehman’s demand that they buy back defaulted or otherwise problematic loans.

In another case, the PMI Group, a mortgage insurer, sued WMC Mortgage, a subprime lender that has stopped making loans, and its corporate parent, General Electric, in California Superior Court. PMI is trying to force the companies to buy back or replace loans that the firm was hired to insure and that it says were made fraudulently or in violation of the standards that the lender said it was using.

According to the lawsuit, a review of loans found “a systemic failure by WMC to apply sound underwriting standards and practices.” Reviewing a sample of the nearly 5,000 loans in the pool, Clayton, a consultant that reviews mortgage loans, identified 120 “defective” loans for which borrowers’ incomes and employment were incorrect or where the borrower’s intention to live in the home was incorrect. WMC offered to buy back 14 loans, according to the lawsuit.

Some of the loans have defaulted, and a trustee’s report on the pool of loans packaged and underwritten by UBS, the Swiss investment bank, shows that losses on some defaulted mortgages are as high as 100 percent. As of November, about 27 percent of the loans in the pool were either delinquent 60 days or more, in foreclosure or had resulted in a repossessed home.

PMI is on the hook for losses on defaulted loans, lost interest and principal payments to investors who own a $29.6 million slice of bonds backed by the mortgages. A senior vice president at PMI, Glenn Corso, said he was unsure how much the company had paid out so far.

A spokesman for G.E., Robert Rendine, declined to comment, citing the pending litigation.

Securities lawyers say cases involving mortgage-backed securities, which were generally sold privately to sophisticated institutional investors, are far more complicated than those involving stocks, which were sold publicly to everyday investors. Class-action lawsuits, a favorite tool of plaintiffs’ attorneys, will be employed less than they were after the plunge in technology stocks a few years ago because mortgage securities tend to vary in composition and disclosure.

“This is going to be much more complicated to prove, and it’s going to be case by case as opposed to class-actions,” said David J. Grais, who is a partner at the Grais & Ellsworth law firm in New York and an author of a recent paper on the legal liabilities of credit ratings firms. “This resembles the S&L crisis in the ’80s much more than it does the tech bubble in the ’90s.”

Class-action filings spiked earlier this decade, jumping to 497 in 2001, from 215 the year before, according to Cornerstone Research, which compiles the figures in cooperation with the Stanford Law School. As those suits were resolved, new filings fell to a low of 118 in 2006. But as of mid-December, filings had jumped to 169, with about 32 of the cases related to the mortgage crisis.

Through the end of 2006, settlements in technology- and telecommunications-related class-action suits brought by shareholders totaled $15.4 billion, with more than a third of that coming from one company, WorldCom, according to Cornerstone. Settlements in Enron-related cases have totaled about $7.2 billion so far; the figure does not include Securities and Exchange Commission fines and settlements.

Bringing securities fraud cases has been made harder by recent Supreme Court decisions that favored Wall Street, companies and professionals like accountants. The court ruled earlier this month that two technology vendors could not be held liable for taking part in a scheme designed by a cable company to inflate its revenue. Last summer, in a ruling favoring the company, Tellabs, the court said that securities cases could be dismissed if investors did not show “cogent and compelling” evidence of intent to defraud.

Some plaintiffs are using other legal avenues like the pension law, the Employment Retirement Income Security Act. Under that law, managers who handle pension funds must act in the fiduciary interest of their clients. State Street Global Advisors, which manages pension money, has set aside $618 million to settle claims that the firm invested in risky mortgage-related securities.

Some legal experts say that the recent Supreme Court decisions, which are largely based on cases bought by shareholders, may not have much bearing on the more complex cases that stem from securitization of mortgages.

“There will be a whole new set of claims that deal with the unique nature of the securitization market,” Mr. Tambe of Jones Day said. “There will have to be new decisions that deal with those claims and a learning process for the bar and judiciary in those cases.”

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