According to Stiglitz, the primary cause of the recession is historically unique and thus perplexing those responsible for finding solutions. Previous recessions were caused either by excessive inventories or inflation. This downturn is caused by "badly impaired" banks and financial entities that will or cannot lend capital. Even borrowers who usually drive the country back to vitality remain uncertain as to what to do.

Okada was one of 13 people charged in 2007 in what authorities have called the most pervasive insider trading rings since the 1980s.

Okada used information from UBS AG research reports, before the reports were made public, to execute hundreds of trades totaling $17.5 million.

In April, the Securities and Exchange Commission (SEC) launched the “PAUSE” program to provide investors with regularly updated factual information, derived from investor complaints and other sources, about the questionable email or telephone solicitations from, securities firms. This program will shed light on a dark corner of the financial world attracted by Atlanta’s decade-long economic boom.

After weeks of intense internal debate, Citigroup is offering to cover some of the losses. This offer is tantamount to an admission that the hedge funds were misrepresented to investors.

Falcon invested in municipal bonds, mortgage-backed securities, bank loans and other debt instruments; ASTA/MAT emphasized municipal bonds. Each consisted of different funds that were launched periodically. Last year, as it geared up to launch new Falcon and ASTA/MAT funds, Citigroup encouraged the brokers at Smith Barney and Citigroup’s private bankers to pitch the funds to their best customers. Of course, they told none of these customers that one reason for the push was that Falcon had declined more than 10% and Citigroup wanted to stabilize it with new cash.

"There still seems to be a disconnect between homeowners and their mortgage servicers," says North Carolina's deputy commissioner of banks Mark E. Pearce.

The problem materialized because of a formula designed to ensure that borrowers do not pay more interest on their debt than they receive from student-loan clients. The formula is based on a 12-month average of benchmark money market yields, which have fallen drastically as the Federal Reserve slashed its target rate for overnight loans between banks in September 2007.

Auction-rate bonds are long-term securities whose rates are determined through bidding run by dealers every 7, 28 or 35 days. When a sufficient number of buyers fail to bid, the auction fails and the rate resets to a level set out in the original terms under which the auction-rate securities were sold.

On April 21, the National Association for Business Economics (NABE) said that the 109 members who responded to its quarterly survey were “notably downbeat” about their first-quarter experience as well as near-term prospects. Other economists warned the nation's homebuilders that the sinking sector may not hit bottom for another year.

"For the first time in five years, reports of falling profit margins outnumbered reports of rising margins in the first quarter of 2008, while demand . . . grew more weakly than at any time since the recession of 2001," said Ken Simonson, chief economist for Associated General Contractors of America.

S&P revealed that, under its new recovery assumptions, any class rated A or lower would likely suffer 100% losses and the losses on AA-rated slices would be 95%. The junior AAA-rated tranches expect to lose 65% and even the riskless super-senior AAA tranches will suffer losses of 40%.

More than 4,000 of these CDOs have been downgraded this year – amounting to about 90% of all CDO downgrades. Further ratings cuts by S&P – on top of the $351 billion in cuts over the past year – may push investment banks such as UBS and Citigroup to sell CDO debt rather than wait for demand to recover. S&P is currently reviewing the ratings of $16.3 billion in CDOs with a “a high likelihood of downgrade.”

Shiller is one of the pioneers behind the Standard & Poor’s/Case-Shiller home price index. The index is seen as a solid measure of home prices because it examines changes in the price of the same property over time versus calculating the median price of homes sold during a particular month.

According to Caroline Salas on Bloomberg.com on April 23, however, New York-based Fitch Ratings reports that, instead of receiving the historical average recovery of 42 cents on the dollar, in a default situation, bondholders of a third of high-yield, high-risk bonds rated B+ or lower may receive no more than 10 cents on the dollar. Another 22 percent are likely to only get 11 to 30 cents.

“When leverage was so ample, private equity firms were able to buy companies at multiples that didn't make sense,” said James Keenan, who is co-head of leveraged finance at BlackRock Inc. “Most people use the assumption senior unsecured bonds are going to recover 40 percent. I don't think you're going to see that,” Keenan advised.

The investigations are proceeding on two fronts: first, whether Cioffi and his team deliberately misled investors about the funds' health; and second, whether Cioffi and his team placed false values on collateralized debt obligations (CDOs).

The issue of CDO valuation – valuation based on internal models rather than actual market values – had been controversial ever since the CDO market collapsed in 2007. The BusinessWeek.com article contained the following quote: "If the valuations become a criminal issue [for] Bear Stearns, it would send a warning shot across the bow of every firm that marketed these exotic products," said Steven B. Caruso, an attorney representing several Bear investors who is part of the coalition representing subprime investors in which Page Perry participates.

With a marketing description such as that, it is obvious that Schwab routinely recommended the Yield Plus Fund to investors whose objectives were safety and preservation of capital. The Yield Plus Fund, however, was heavily invested in mortgage-backed securities and was clearly not a safe investment. The fund’s asset base peaked last year at $13.5 billion and had dropped to $1.5 billion earlier this month. The fund has had such poor results that even the Schwab Charitable Fund has withdrawn donor investments from the Yield Plus Fund.

Such a behind-the-scenes move clearly demonstrates that Wall Street firms were struggling to keep the auction-rate market afloat for months before the existence of the problems became public knowledge. In other words, the firms knew of the upcoming storm and kept the investing public in the dark. This conduct raises serious questions of what exactly Wall Street firms were telling their clients about the emerging risks in the auction-rate markets. As often happens, Wall Street firms found themselves with conflicted loyalties between the issuers and the investors. In this case, Wall Street chose to work with the issuers and not the investing public.

Hyperion Brookfield Asset Management Inc., a unit of Brookfield Asset Management Inc., which manages $22 billion, will manage the portfolios going forward and a new board of directors will be nominated. Hyperion Brookfield is not entirely a stranger to the funds; it had been serving as an independent valuation consultant.