August 12, 2008

Banks begin ARS buy-backs

As regulators investigate banks in the wake of the collapse of the auction rate security market in February, several have offered to buy back ARS from investors. Morgan Stanley's offer to buy back $4.5 billion in ARS was shot down by New York Attorney-General Andrew Cuomo as "too little, too late," according to the Financial Times. Citigroup, UBS and Merrill Lynch will buy back a total of more than $41 billion in ARS.

UBS agreed to buy back $18.6 billion from retail and institutional investors, the Times writes. Citi agreed to buy back $6.5 billion from individual investors, but failed to commit to the $12 billion in ARS from pension funds and institutional investors. JPMorgan and Wachovia were still in talks with regulators earlier this week. An offer from Merrill Lynch is still under review as it lacks enough investor protection.

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