Wachovia Securities Inspected Over Auction Rate Securities
Article Submitted By: Sam Cass
The auction rate mess is winding down but inquiries are moving forward. Today, Wachovia became the latest bank to be investigated over its auction rate securities practices.
The auction rate mess is winding down but inquiries are moving forward. Today, Wachovia became the latest bank to be investigated over its auction rate securities practices. Bloomberg reports that:
"Investigators searched the unit's St. Louis headquarters to seek information about sales practices, internal evaluations of the auction-rate securities market and marketing strategies, Missouri's Securities Division said in a statement. More than a dozen subpoenas were issued to Wachovia executives and agents.
By stepping up their inquiry, states want ``to assure the public that if there are wrongs they will not be tolerated,'' said Tamar Frankel, a law professor at Boston University. ``A lot of people were hurt'' by auction-rate securities, she said.
As much as $218 billion of auction-rate bonds sold by student-loan providers, municipalities and closed-end mutual funds remain frozen after firms abandoned their role as buyers of last resort in February. Investors have filed more than 70 formal complaints with the state against various institutions in the last four months, representing more than $40 million of frozen assets, according to the statement."
So, who's to blame here? The banks who didn't fully disclose the risks of these investments or the individuals who didn't force the banks to explain the risks of what they were putting their money into. Probably both.
