Auction Rate Securities Lawsuits

"We anticipated further talks," Merrill said in the statement.

The expected lawsuit comes a week after Merrill said it would voluntarily repurchase auction-rate securities from customers. Merrill said it would buy back securities between Jan. 15, 2009 and Jan. 15, 2010. The bank said the repurchase plan would likely affect 30,000 clients holdings about $10 billion in the securities.

The attorney general's office called the bank's voluntary buyback plan "woefully inadequate," according to the letter sent to Merrill. The letter said the attorney general is still open to reaching a settlement with Merrill, assuming the bank meets similar provisions agreed upon by other banks reaching settlements.

Earlier Friday, Wachovia Corp. became the fifth bank to settle as part of the investigation; Wachovia agreed to buy back $8.5 billion of the securities at face value from investors. The Charlotte, N.C.-based bank will also pay $50 million in fines to be distributed among states. The fines will be distributed to states based on the amount of securities sold to investors in each state.

Over the past eight days, Citigroup, UBS AG, JPMorgan Chase & Co. and Morgan Stanley agreed to repurchase a combined $32.6 billion in auction-rate securities and will pay fines totaling $310 million.

Regulators have been investigating the collapse in the market to determine who was responsible for its demise and whether banks knowingly misrepresented the safety of the securities when selling them to investors.

Like the other banks that have reached agreements with regulators, Wachovia will buy back all auction-rate securities from retail customers, charities and small businesses. It will buy back those securities by Nov. 28. Wachovia will also reimburse customers who sold securities at a loss after the market collapsed in February.

Losses from the auction-rate securities are likely to be smaller than those from mortgage-backed securities. Sure or not???!!

UBS said it will take a charge of about $900 million on a pretax basis -- including its $150 million fine -- to buy back $18.6 billion in auction-rate securities.
Citigroup said it will take a pretax charge of about $500 million because of its settlement to repurchase $7 billion in the securities.