In the first of what is likely to be an avalanche of suits over the collapse of the auction-rate market, UBS (NYSE: UBS) has been sued for misleading investors. According to The Wall Street Journal (subscription required), the suit claims that "UBS engaged in 'a deceptive and misleading plan' to cause its clients to place their money in auction-rate securities instead of customarily liquid investment products such as money-market funds."

There are two kinds of legal actions the banks and brokerages who ran that auction-rate market since 1985 will face. The first is that clients, both corporate and consumer, will claim that auction-rate securities were not actually the equivalent of cash, but were marketed as such. Individual investors and some public companies are already facing a liquidity crisis as they try to get their money out of auction-rate paper.

The other set of suits will likely be over whether companies like UBS and Merrill Lynch (NYSE: MER) had an obligation to keep the auction-rate market running once they had, over a 20-year period, created an "exchange" that investors could reasonably believe would have regular and successful auctions.

It's another straw on the back of financial companies where the troubles are growing by the day.

Douglas A. McIntyre is an editor at 247wallst.com.

As I waited for Bear Stearns Cos. (NYSE: BSC) conference call today, I could only shake my head in familiarity. I'm not the only one to see Lehman Brothers in 1998 all over again. Was it only a matter of time before the liquidity crisis hit? Bear Stearns has always been in the eye of the storm.

In the mind's eye of every young investment banker is an image of the people who work for various firms. Goldman Sachs' and Merrill Lynch's associates are stunningly beautiful and slim, the women are blondes with shiny hair and everyone wears French blue Egyptian cotton shirts. At Merrill Lynch and J.P. Morgan, it's all pinstripes and quiet good looks, confidence and understatement. At Lehman and Bear Stearns? Brash is the name of the game, and the young associates look like they're freshly showered after their championship wrestling match. You imagine that half of them are Army reservists, or maybe Navy Seals. Conservative? Only in the cost of their suits.

No, Bear Stearns brings "aggressive" to new heights, and certainly over the last few weeks its stakeholders are running scared. According to CEO Alan Schwartz in today's statements, the liquidity crunch was a phantom, "untrue rumors" that the company was undergoing a run on its assets scared lenders, and suddenly, no one would loan the investment bank overnight funds -- as Jim Cramer says succinctly, it's the "who is still stupid enough to have big trades" that put an institution at risk, fear. As Tom Taulli wrote, all the risk factors were suddenly triggered and Schwartz said those ugly words, "the liquidity position deteriorated," the words no one wanted to hear. Peter Cohan can't believe how quickly we've gone from liquidity concerns to a government bailout, and asks, "Why is the Fed getting involved instead of private investors? How bad is the problem really?"

Bad enough to send an already fragile market tumbling back down (the Dow is down 252 points as of 3:20 p.m.); bad enough to drag down peers like Citigroup, too. Brash, aggressive, bad suit bad. We can only hope the pinstripes over at J.P. Morgan Chase will make it all better again.