It’s often said that the problem with bailouts is that taxpayers wind up footing the bill for bad behaviour.
That’s never been more true than today.
You see, today a group of investment bank underwriters and companies settled a long-running lawsuit over alleged fraud in the pricing of initial public offerings in the late 1990s. It was a case that sprung out of the last crash and lasted well into this one. It grew to include over 300 IPOs, mostly of of tech and internet companies that went public between 1998 and 2000. Class action lawyers claimed that the stocks were marketed at inflated prices and compensation to underwriters hidden.
The settlement agreement has been filed under seal in the U.S. District Court in Manhattan. But a copy of the agreement has been posted on the Wall Street Journal’s website. A lawyer on the case told Reuters the case had been settled. The banks agreed to pay $586 million while denying any wrongdoing.
Since many of the defendants, including JPMorgan Chase, Goldman Sachs and Morgan Stanley, are still funded with billions of taxpayer dollars, the US taxpayer has effectively been made to pay for the case. The executives at banks who got bonuses during the internet boom and shareholders who got dividends, effectively avoided any responsibility. If it makes you feel better, you too can deny any wrong-doing in the case.
Ironically, the plaintiffs got less than the $1 billion that was on offer during one of the many earlier settlements that fell apart. What happened, it seems, is that many of the plaintiffs are at risk of failing or–like Lehman Brothers and Bear Stearns–have already failed. AIG was also a defendant.
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