3 More Banks To Buy Back Securities

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The New York Sun

Merrill Lynch & Co., Goldman Sachs Group Inc., and Deutsche Bank AG agreed to buy back almost $15 billion in failed auction-rate securities and pay fines totaling about $160 million, settling probes by state regulators.

The accords bring to eight the number of firms that have reached settlements in the last two weeks into claims they misled investors by fraudulently marketing the long-term securities as easy to buy and sell. Merrill will buy back as much as $12 billion in securities and pay fines of $125 million.

“It’s been a great day of progress,” Attorney General Cuomo said when he announced the agreements this afternoon. The chief executive officer of Merrill, John Thain, who took part in talks that led to yesterday’s agreement, understood his firm had to “step up to the plate,” Mr. Cuomo said.

Wall Street banks are settling claims stemming from a nationwide investigation into allegations banks peddled auction-rate securities as investments that were as liquid as cash. The $330 billion market seized up in February, when the credit crisis prompted banks to stop supporting the periodic auctions at which the securities were bought and sold.

Goldman will buy back $1.5 billion of the securities and pay a $22.5 million fine. Deutsche Bank will redeem $1 billion of debt and was fined $15 million. Merrill, which offered on August 7 to buy back $10 billion of debt starting in January, will now start buying it in October.

“We are pleased our clients have the certainty of a favorable resolution to this unprecedented liquidity crisis,” Mr. Thain, 53, said in a statement. Deutsche Bank is also “pleased to resolve this matter,” a spokesman, Ted Meyer, said. A spokesman for Goldman, Michael Duvally, had no immediate comment.

UBS AG, Citigroup Inc., and three other Wall Street banks have agreed to repurchase almost $35 billion of auction-rate debt from individuals, charities and small businesses, accounting for about 17% of the estimated $200 billion left in the market. Joined by Morgan Stanley, JPMorgan Chase & Co., and Wachovia Corp., the banks have agreed to pay $360 million in fines. Bank of America Corp. is among the last major banks that haven’t yet reached settlements.


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