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CNNMoney reports that Morgan Stanley (NYSE: MS) is the latest bank to buy back its worthless Auction Rate Securities (ARS) from individual investors. With that buyback, Morgan Stanley follows in the wake of Citigroup, Inc. (NYSE: C), Merrill Lynch & Co., Inc. (NYSE: MER) and UBS AG (NYSE: UBS).
CNNMoney notes that Morgan Stanley said it would offer to repurchase all ARS "held by individuals, charities and small and medium-sized business with accounts of $10 million or less at the bank." Morgan Stanley will begin to start buying back $4.5 billion worth of ARS on September 30th and will "make its best effort to provide liquidity solutions" for institutional investors by the end of 2009. But New York attorney general Andrew Cuomo is not satisfied with Morgan Stanley's proposal.
Meanwhile, the list of big ARS issuers that have not settled grows shorter. Here are six holdouts (with their 2007 municipal ARS issuance in parentheses):
- JPMorgan Chase (NYSE: JPM) ($5.2 B)
- Goldman Sachs (NYSE: GS) ($4.3 B)
- Bank of America (NYSE: BAC) ($3.7 B)
- RBC Capital Markets ($1.2 B)
- Lehman Brothers (NYSE: LEH) ($1.1 B)
- Wachovia (NYSE: WB) ($0.6 B)
There are many small and medium sized brokerages that are not on this list. Cuomo is starting off with the bigger fish and hopes to use their settlements to push the entire industry to make its customers whole.
It's a wonder that some people think Wall Street needs less regulation.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup stock and has no financial interest in the other securities mentioned.
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Reader Comments (Page 1 of 1)
8-12-2008 @ 6:22PM
victor gerendasy said...
I HAVE AUCTION RATE SECURITIES THAT WERE PURCHASED FOR ME AT MORGAN STANLEY. THE RATES HAVE DROPPED TREMENDOUSLY AND MORGAN STANLEY SHOULD PAY FOR THE INTEREST THAT I AM LOSING BY NOT BUYING THESE ARS BACK IMMEDIATELY AND NOT HOLDING INVESTORS LIKE MYSELF OUT TO GET 1.5 TO 2% INSTEAD OF 4 TO 5% THAT MUNIS SHOULD BE PAYING. MR CUOMO SHOULD REALLY HIT M-S AS THEY DON'T CARE ABOUT SMALL INVESTORS. THEY DON'T LOOK OUT FOR US ATALL. THEY JUST WANT TO SELL US ANYTHING THEY PLEASE AND THE HELL WITH US.