The banks have decided to fight back against a wave of litigation that surpasses even that of the Enron scandal.  Law suits have been pouring in since the start of the sub-prime mortgage crisis.

"In terms of the potential numbers of lawsuits, the sub-crime crisis could be bigger than Enron,” Tim House, a banking litigation partner at Allen & Overy, said. "But this time we can expect banks to be much less willing to simply settle quickly.”

While banks are usually willing to settle major claims to avoid costly legal battles, in this case they are willing to do what it takes to defeat the potential influx of even more law suits.

“In a rising market there is a rational business argument to settle cases in order to put the matter behind you and move on and focus your resources elsewhere,” Mr Burnett said. “But with general economic prospects the way they are, that incentive may disappear.”

Law suits surrounding the mortgage crisis will not be limited to class actions, and larger institutions are expected to take one another on as well.

In a recent landmark case, a judge ruled that the institution selling a financial product can invoke a non-reliance clause only if it can prove the buyer did not rely on anything said by sales staff up to the point it signed the contract.

The credit crunch is a large factor in Meryll Lynch's determination that the US is now in a recession. 

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