Prepared by:Richard K. Traub

Traub Lieberman Straus & Shrewsberry LLP

What is the Government DoingRegulatory Reform Bill

Too Big Too Fail – No MoreAdvance Warning SystemTransparency and Accountability for Exotic

InstrumentsExecutive Compensation and Corporate

GovernanceEnforce Regulation Already on the BooksNew Consumer Financial Protection Watchdog

Modernization of RegulationCurrent U.S. System – same since 1850’sRegulated by the States (51 jurisdictions)IAIS (International Association of Insurance

Supervisors):Financial and SolvencyCorporate GovernanceMarket Conduct

No National Level Regulator – How can we be deemed “equivalent” to Solvency.

Most Regulated Industry – but Ineffective.

U.S. TORT SCHEME:Were There is Blame, There Will be a ClaimWhere are the Potential Claims?

Fiduciary LiabilityERISA (Employee Retirement Income

Security Act)Claims against administrators of pension and

other benefit plans.Bad investments including investments with

Madoff.Intentionally misleading investors

Directors and OfficersSecurities SuitsSecurities FraudGoldman SachsShareholder SuitsCorporate BankruptciesFailed Banks

Errors and Omissions Claims Against Ratings Agencies

MoodysStandard & Poor’sFitch

Based on alleged inflated bond rating given to mortgage back securities.

Sub-Prime Mortgage Claims

Sub-Prime Mortgage Facts

Type of LawsuitsHomeowners vs. LendersMortgage Lenders vs. Wall Street BankersWall Street Bankers vs. Loan SpecialistsInvestors vs. Everyone

IssuesWhether lenders and investment banks

alerted borrowers to the risks imposed by subprime loans or the securities backed by them, and

How much were they legally obliged to disclose?

LitigationPrimarily focused on loan origination – BUTThe number of cases has quadrupled this

year.43% - class actions22% - securities cases22% - Commercial contract disputes23% - bankruptcy, employment,

professional

Anticipated Suits v. Every Participant in the ProcessMortgage Bankers and Loan Correspondents Mortgage BrokersLendersAppraisersTitle CompaniesUnderwriting FirmsBond InsurersMoney ManagersPublic Accounting FirmsD & O’sLawyersReal Estate Brokers - Fiduciary

E & O InsuranceClaims v. Hedge Funds

Failure to disclose investment fund’s risk and exposure to toxic assets. Bear Stearn’s Citigroup UBS v. Global, Inc.

CGL CoverageHousing Discrimination Claims

Targeting minorities with predatory lending practices.

Foreclosure Nuisance ClaimsCleveland v. mortgage lenders claiming that

foreclosure practices have led a public nuisance (blighted neighborhoods).

Employer Liability CoverageClaims by Laid off Employees

Discrimination complaints

Key Threats to InsurersSoft Market and RecessionPrice ErosionOverreaching Regulation Shortage of CapitalExploitation of Insurance as a Wealth

Distribution MechanismNationalization of Insurance System

CAT risks TARP money

Emerging Tort Threat and Reversal of Tort Reform