Hard-to-sell long-term securities had been bought with short-lived debt, which left borrowers vulnerable to a change in sentiment every time the debt fell due.

ECONOMIST: Risk and the new financial order

The recovery was "likely to be relatively short-lived as exports start to fall next year, " said Peter Morgan, chief economist at HSBC Securities in Tokyo.

BBC: Japan's growth picks up

Rakoff rejected that idea in his 103-page decision, saying Flagstar had violated its contract with Assured by stuffing securities with mortgages issued to borrowers with clearly inflated incomes and misrepresentations on details such as whether they lived in the homes they were borrowing against.

FORBES: Assured Guaranty Victory Over Mortgages May Mean Trouble For BofA