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UPDATE: Bank Of America 'Ready' To Settle Auction-Rate Probe

September 4, 2008

By Chad Bray Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Bank of America Corp. (BAC) said Thursday that it is " ready and willing" to enter into a settlement with regulators to buy back auction-rate securities from its customers.

In a statement, Shirley Norton, a Bank of America spokeswoman, said the bank has been in discussions for nearly a month with regulators in New York, Massachusetts and other states and the U.S. Securities and Exchange Commission in hopes of reaching an agreement to provide "liquidity relief" to its customers who hold the complex securities.

The Charlotte, N.C., banking giant said it wants to reach an agreement "that follows the same basic terms of previously announced settlements" with other banks to buy back auction-rate securities from retail clients and small businesses.

"We understood that we had reached such an agreement in principle nearly two weeks ago," Norton said. "We hope that all of the parties will work towards completing a settlement for the benefit of investors who have been affected by unprecedented market disruptions."

New York Attorney General Andrew Cuomo sent subpoenas on Wednesday and Thursday to eight Bank of America executives, according to a person familiar with the investigation.

Norton declined to comment Thursday on whether the bank had received the subpoenas.

Cuomo's office indicated last month it was stepping up its probe of sales of the complex securities by Bank of America and two other banks that ultimately settled with his office and other state regulators.

In its Thursday editions, the Boston Globe reported that Massachusetts Secretary of State William F. Galvin said talks with Bank of America on buying back auction-rate securities from its clients had stalled and his office might sue the company.

Last week, Bank of America agreed to buy back $43 million of the securities from government agencies in Massachusetts, state regulators said.

Norton declined to comment Thursday on what might be holding up an agreement with regulators or how much in auction-rate securities the bank might buy back from customers.

In recent weeks, regulators have reached settlements with Citigroup Inc. (C), UBS AG (UBS), JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), Wachovia Corp. ( WB), Merrill Lynch & Co. (MER), Deutsche Bank AG (DB) and Goldman Sachs Group ( GS) who will buy back more than $50 billion worth of the securities.

Auction-rate securities are debt instruments whose interest rates are reset periodically at daily, weekly or monthly auctions. Several auctions failed in February, driving up interest rates for auction-rate securities issuers, while leaving investors locked into investments that had been promoted to them as safe and liquid.

Cuomo has previously said his office is investigating a number of banks and hopes to reach similar resolutions with them. Last month, Cuomo said his office is looking at about 25 firms.

The attorney general has said his office is investigating individuals at banks about their actions in marketing the securities and the settlements announced so far don't preclude his office or other regulators from taking actions against those individuals.

-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com

 

 

 

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