Bloomberg News reports that 10 of the biggest names in investment banking are blocking investors from getting their hands on their share of the $330 billion Auction Rate Securities (ARS) that they were told was as safe as a money market fund.
I first posted about this back in February and now it has 4,325 comments from people trying to get at their money. Bloomberg quotes one victim of frozen ARS syndrome: Franklin Biddar, a 65-year old real estate investor who can't get his $100,000. "I can't do anything," said Biddar, who was so eager to unlock his money that he was willing to accept 11 percent less than what he paid for the securities. "Bank of America (NYSE: BAC) got me into these securities that are supposed to be as safe as a money market, and now they won't get me out."
Here's a list of the banks involved in this money blocking operation and the volume of municipal ARSs they issued between 2001 and 2007:
- Citigroup (NYSE: C), $39.73 billion
- UBS, $31.50 billion
- Morgan Stanley (NYSE: MS), $20.13 billion
- Goldman Sachs (NYSE: GS), $17.80 billion
- JP Morgan (NYSE: JPM), $15.72 billion
- Bear Stearns (RIP) $12.61 billion
- Merrill Lynch (NYSE: MER), $12.37 billion
- Bank of America, $11.03 billion
- RBC Dain Rauscher, $10.25 billion
- Lehman Brothers (NYSE: LEH), $9.74 billion
If you have money in ARSs, here's Barron's guess as to your chances of getting your money back.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup shares and has no financial interest in the other securities mentioned.











Reader Comments (Page 1 of 1)
6-06-2008 @ 5:19PM
Erikaduh said...
I hope AIG likes me. "AIG won't soon forget me". I'm pleased to anounce that my attorney has filed the 1st of many lawsuits to come against your bad faith company. I also am proud to anounce that I have cost your company $500,000+ so far in new business that emailed me or spoke with me personally and told me thanks for warning them not to buy your products because they need to be able to count on being paid if they have a claim. All the people were very upset to here how AIG treated me and my company. I should be at $1,000,000+ loss for AIG by months end and I won't be stopping there. I noticed your stock down to its lowest level in 52 weeks you can thank me for part of that. Oh Tim Fowler in the Tempe,Az claims office kiss my as". I told you I'd get even. Hope they fire you when the lay offs hit.
6-06-2008 @ 6:06PM
Erikaduh said...
Stay away from Bank of America unless you like being treated like a side of meat at a California slaughter house. Sell all you AIG stock also they are a bad faith insurer and a lier. Oh by the way did you know that 5,000 billion dollars is held off the books, most being write downs are held by most of these banks listed in this article. If you think the banks have been telling you investors the truth or that Bernake at the Fed has a clue then you are as dumb as the banks think you are. You need to sell all financial stocks and run my friends I said run not walk.
6-07-2008 @ 1:42AM
Erikaduh said...
Big suprise that the biggest losers in the financial world can't and won't return money to people they mislead. I told everyone in a blog last week that the major banks are robbing peter to pay paul and that their balance sheets are worth than a first graders arithmatic skills on the first day of class. The banks can't return what they already spent and don't have anymore. Run from the financials while you still can.
7-10-2008 @ 1:50AM
Serge Birbrair said...
I don't think they have the money to return,
those money are long gone in sub prime mortgages