UBS Emails Show Banks Tried to Offload Auction Rate Albatross to Individual Investors

Emails from UBS continue to paint a picture of banks knowingly selling damaged and failing investment products to individual investors in bids to reduce their own exposure.

More allegations are emerging that even as investment banks knew that the auction rate security market was collapsing, they were trying to offload these investments to their individual clients.  And they were still actively promoting and marketing ARS as safe, cash equivalent investments. 

According to a Bloomberg article posted yesterday, David Shulman, the head of the UBS municipal securities group sent an email saying of auction rate securities:

"We need to move this paper and have to explore all angles possible,'' Shulman said in a Dec. 11 e-mail to Paul Wozniak, co-head of the student loan group at UBS. "We need to do this as quickly as possible.''

These emails are emerging as part of an investigation launched by attorney generals of several states. 

Many banks are under intense scrutiny for the collapse of the auction rate security market and I think it's likely we'll see further allegations emerge.  How this will resolve itself remains to be seen.  The banks may feel pressure to cash out their stranded clients, resulting in further write-downs.  If you are an individual investor who is stuck in ARS, stay tuned. 

There are additional articles posted on Auction Rate Securities here.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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