New York may sue
JOE BEL BRUNO
The Associated Press
August 21, 2008 at 12:58 PM EDT
NEW YORK — New York Attorney General Andrew Cuomo said Thursday he'll
file a lawsuit against Merrill Lynch & Co. over its role in selling
auction-rate securities if an agreement isn't reached by the end of the
Mr. Cuomo, who along with other regulators has reached $42-billion
(U.S.) worth of settlements with five major Wall Street banks, said
talks with the world's largest brokerage were at an impasse.
He said his office had given Merrill a five-day warning that it planned
to take legal action; the warning expires Thursday. The attorney general
pledged to file a suit in New York State Supreme Court by Friday
“Enough is enough,” Mr. Cuomo told The Associated Press in an interview.
“Delay doesn't work as a tactic. I want them to come in quickly and
resolve this expeditiously.”
Wachovia agrees to buy back $8.5-billion in auction-rate securities
Merrill Lynch earlier this month agreed to buy back an estimated
$12-billion in auction-rate securities, though the company said it has
already been buying back the debt. Merrill Lynch's plan was on a
voluntary basis and put no set timetable on the transactions.
Mr. Cuomo said he wants the investment bank to buy back the securities
within a set period of time, and to also pay fines for having pitched
them as safe investments to customers. A spokesman for Merrill Lynch
declined to comment.
“The main point is the timing of how quickly they offer the buy backs to
the investors,” Mr. Cuomo said. “We want that done quickly, and they had
a voluntary time frame that was not acceptable.”
The investigations are examining how brokerages sold auction-rate
securities before the $330-billion market collapsed in February. No one
that has settled has admitted wrongdoing.
The auction-rate securities market involved investors buying and selling
instruments that resembled corporate debt, but the interest rates on the
investments were reset at regular auctions, some as frequently as once a
week. A number of companies and retail clients invested in the
securities because they could treat their holdings almost like cash.
But the market collapsed in February amid the downturn in the broader
credit markets. Regulators have been investigating the meltdown in the
market to determine who was responsible and whether banks knowingly
misrepresented the safety of the securities when selling them to
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