Rogues gallery of banks block investor access to $330 billion


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:

  1. Citigroup (NYSE: C), $39.73 billion
  2. UBS, $31.50 billion
  3. Morgan Stanley (NYSE: MS), $20.13 billion
  4. Goldman Sachs (NYSE: GS), $17.80 billion
  5. JP Morgan (NYSE: JPM), $15.72 billion
  6. Bear Stearns (RIP) $12.61 billion
  7. Merrill Lynch (NYSE: MER), $12.37 billion
  8. Bank of America, $11.03 billion
  9. RBC Dain Rauscher, $10.25 billion
  10. 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.

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