Auction Rate

Orange County, once bankrupted by wrong-way interest-rate investments, is looking to buy auction-rate notes sold by other municipalities as higher interest rates cost those governments millions of dollars. County Treasurer Chriss Street told the Board of Supervisors on Tuesday that his staff was researching whether investing in auction-rate bonds would be permissible for the county's $7-billion investment pool. Interest costs for some public entities have almost doubled after the $330-billion auction-rate bond market broke down last month amid losses tied to sub-prime mortgage bonds and related securities that threatened bond insurers' AAA ratings.

California regulators have announced a final settlement in a dispute with E-Trade Securities that could refund up to $20 million to Golden State investors. The California Department of Corporations late Friday said it closed an investigation that alleged E-Trade misrepresented so-called "auction-rate securities" to buyers as "safe, cash-equivalent products, even though the products faced increasing liquidity risk. " E-Trade also will pay nearly $1.1 million in administrative penalties to the state and agreed to abide by a legal order prohibiting violations of California securities laws, including not supervising brokers selling auction-rate securities, the department said in a statement.

Instead of the carrot-and-stick approach, New York Atty. Gen. Andrew Cuomo on Monday used two sticks in his bid to force Charles Schwab Corp. to pay off clients who bought auction-rate preferred securities from the discount brokerage. Stick No. 1: Cuomo threatened Schwab with a lawsuit if the firm didn't agree to buy back the notorious securities. Stick No. 2: Applying peer pressure, Cuomo announced that TD Ameritrade Inc.

California regulators have announced a final settlement in a dispute with E-Trade Securities that would allow holders of certain investments to get refunds of up to $20 million. The California Department of Corporations late Friday said it closed an investigation that alleged that E-Trade misrepresented so-called "auction-rate securities" to buyers as "safe, cash-equivalent products, even though the products faced increasing liquidity risk. E-Trade also will pay nearly $1.1 million to California in administrative penalities and agreed to abide by a legal order prohibiting violations of state securities laws, including not supervising brokers sellling auction-rate securities, the department said in a statement.

U.S. municipal borrowers pushed down yields on auction-rate bonds to the lowest in 11 weeks by moving to eliminate at least $56.5 billion, or 34%, of the debt they had in the market. Local governments disclosed plans to redeem about 150 tax-exempt auction issues totaling $8.3 billion last week, according to investment bank Siebert Brandford Shank & Co. That's the most since the $166-billion municipal auction market began falling apart in February, the firm said. States, cities and hospitals are replacing the securities and bidding for their own bonds at auctions that set yields to cut interest costs that rose as high as 20%. The average rate on bonds reset weekly fell 2.55 percentage points to 4.34% from a record 6.89% on Feb. 20, a Securities Industry and Financial Markets Assn.

Eaton Vance Corp., the second-largest U.S. manager of closed-end funds, borrowed $1.6 billion to buy back auction-rate preferred stock from investors who were stuck with the securities after the market for them froze up in January. Auction-rate securities are long-term bonds or preferred stock whose interest rates are reset as often as weekly at auctions designed to bring together buyers with investors who want to sell their holdings. But the market for the securities, which had been issued by municipal borrowers and closed-end mutual funds, came unhinged as investors began to shun paper backed by troubled bond insurers.

A growing number of investment funds say they're stepping up plans to return cash to investors who have been stranded in so-called auction-rate preferred stock -- one of the recent casualties of the credit crunch. But the process may be slower than some investors might like. On Wednesday, Chicago-based Nuveen Investments Inc. said it was working on refinancing $15.4 billion of auction-rate stock, considered a type of debt, issued by 100 of its closed-end mutual funds. The firm said it hoped by the end of this month to begin announcing plans for 13 of the funds to redeem their preferred shares.

California regulators have announced a final settlement in a dispute with E-Trade Securities that could refund up to $20 million to Golden State investors. The California Department of Corporations late Friday said it closed an investigation that alleged E-Trade misrepresented so-called "auction-rate securities" to buyers as "safe, cash-equivalent products, even though the products faced increasing liquidity risk. " E-Trade also will pay nearly $1.1 million in administrative penalties to the state and agreed to abide by a legal order prohibiting violations of California securities laws, including not supervising brokers selling auction-rate securities, the department said in a statement.

California brokerage Thomas Weisel Partners Group Inc. stuffed $16 million in shaky securities into the accounts of three unsuspecting corporate customers so the brokerage could pay executive bonuses, according to a civil complaint by regulators that was made public Monday. The customers were stuck with the securities when the market for the so-called auction-rate debt froze weeks later as the financial crisis was unfolding in early 2008, according to the complaint filed by the Financial Industry Regulatory Authority, which oversees and is funded by the brokerage industry.

California, the biggest borrower in the municipal bond market, will replace $1.25 billion of so-called auction-rate bonds with traditional debt after a series of auction failures nationwide sent rates soaring. The state will convert $400 million of auction-rate general obligation bonds sold in 2003 and $500 million of power revenue bonds and $350 million of water bonds sold in 2002, debt manager Paul Rosenstiel said Thursday. The bond sales will occur within months, he said. "We plan to redeem these as soon as we can so that we are out of auctions," he said.

A lawsuit against Charles Schwab Corp. over auction-rate securities that was filed by former New York Atty. Gen. Andrew Cuomo was thrown out by a state court judge. The 2009 lawsuit accused the San Francisco discount brokerage of fraud in the marketing and sale of the securities and alleged that the company's brokers falsely represented the securities as safe, liquid investments. In a decision released Monday, Manhattan state Supreme Court Justice O. Peter Sherwood granted Schwab's motion to dismiss.

California brokerage Thomas Weisel Partners Group Inc. stuffed $16 million in shaky securities into the accounts of three unsuspecting corporate customers so the brokerage could pay executive bonuses, according to a civil complaint by regulators that was made public Monday. The customers were stuck with the securities when the market for the so-called auction-rate debt froze weeks later as the financial crisis was unfolding in early 2008, according to the complaint filed by the Financial Industry Regulatory Authority, which oversees and is funded by the brokerage industry.

Who deserves credit for forcing Wells Fargo & Co. to buy $1.4 billion in troubled securities from small investors? California Atty. Gen. Jerry Brown and a group of regulators from other states announced separate settlements Wednesday requiring Wells to repurchase so-called auction-rate securities that had been frozen in the credit crunch since early last year. About half of the money is to go to California residents. But the attorney general's office and the regulators group got into a spat over who was responsible for the outcome, with each saying it led the way. Brown's office said it reached a pact with Wells a day before the North American Securities Administrators Assn.

More than two years after he put the bulk of his savings into a supposedly secure investment account at Wells Fargo & Co., Gus White will finally get his money back. Wells Fargo said Wednesday that it had agreed to buy back about $1.4 billion in adjustable-rate bonds that had been frozen since the credit crisis struck early last year, including $700 million held by California residents. Before the crisis, small investors around the country bought billions of dollars of so-called auction-rate securities that Wells Fargo and other financial firms had allegedly marketed as safe and as liquid as savings accounts and money market funds.

Instead of the carrot-and-stick approach, New York Atty. Gen. Andrew Cuomo on Monday used two sticks in his bid to force Charles Schwab Corp. to pay off clients who bought auction-rate preferred securities from the discount brokerage. Stick No. 1: Cuomo threatened Schwab with a lawsuit if the firm didn't agree to buy back the notorious securities. Stick No. 2: Applying peer pressure, Cuomo announced that TD Ameritrade Inc.

The state of California accused Wells Fargo & Co. of fraud Thursday for the company's role in an investment meltdown that has been compared to the Bernard Madoff scandal in magnitude. Atty. Gen. Jerry Brown sued three Wells Fargo investment subsidiaries, alleging they committed securities fraud by telling California investors that $1.5 billion of risky securities sold to them were as safe as cash.

California regulators have announced a final settlement in a dispute with E-Trade Securities that would allow holders of certain investments to get refunds of up to $20 million. The California Department of Corporations late Friday said it closed an investigation that alleged that E-Trade misrepresented so-called "auction-rate securities" to buyers as "safe, cash-equivalent products, even though the products faced increasing liquidity risk. E-Trade also will pay nearly $1.1 million to California in administrative penalities and agreed to abide by a legal order prohibiting violations of state securities laws, including not supervising brokers sellling auction-rate securities, the department said in a statement.

More than two years after he put the bulk of his savings into a supposedly secure investment account at Wells Fargo & Co., Gus White will finally get his money back. Wells Fargo said Wednesday that it had agreed to buy back about $1.4 billion in adjustable-rate bonds that had been frozen since the credit crisis struck early last year, including $700 million held by California residents. Before the crisis, small investors around the country bought billions of dollars of so-called auction-rate securities that Wells Fargo and other financial firms had allegedly marketed as safe and as liquid as savings accounts and money market funds.

Regulators looking into the auction-rate securities debacle have turned their attention to nearly 40 brokerages that may have sold the paper to clients but didn't underwrite it. Investigators from the Financial Industry Regulatory Authority plan to conduct on-site examinations at the brokerages, with the first inspections beginning Monday, to determine whether the firms were aware of the problems in the auction-rate market and adequately warned...

JPMorgan Chase & Co. and Morgan Stanley on Thursday became the latest banks to reach settlements with New York Atty. Gen. Andrew Cuomo and other regulators as part of an investigation into the collapse of the auction-rate securities market. The two banks will repurchase a combined $7 billion of the troubled securities from investors at face value. Morgan Stanley agreed to pay a fine of $35 million and JPMorgan will pay $25 million.