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Street Banks Almost Rocked to the Core
Dear American Capitalist Reader,
In a case that would’ve rocked the core of Wall Street banks, a federal appeals court ruled the banks would not have to answer to a securities class action suit on accusations that they manipulated IPO prices of tech companies during the big boom of the 1990s. The 2nd U.S. Circuit Court of Appeals ruled that a lower court judge had “incorrectly ruled that six focus cases meant to blaze a trail for 310 cases could be considered class actions, enabling lawyers in a few cases to represent thousands of investors at a time.”
The decision now means that hundreds of thousands of investors who sought recovery from the banks may now have to file suits individually. Now, if the banks had chosen to avoid the trial altogether, they’d have been screwed -- royally. And when I say royally, I mean they would have had to pay out billions to settle the suit, which involved 12 firms, including Merrill Lynch, Morgan Stanley, Credit Suisse First Boston, Goldman Sachs, Bear Stearns, Deutsche Bank AG and Lehman Brothers.
Even better, according to The New York Times, “The decision raises the prospects that earlier settlements in the case, in particular a $425 million agreement with JP Morgan Chase and a $1 billion guaranteed proposed deal with the issuers of new shares that was still pending approval by the judge.” This could all be nullified because of yesterday’s ruling.
It’s safe to say there was a huge sigh of relief emanating from the banks yesterday.
Take care,
Ian L. Cooper, Founder, Death Cross Trader and Early Alert Trader
