Greed and dishonesty at the nation's largest financial institutions.  Be careful folks, keep only $100,000 or less in any one bank.  I know it is a bit tougher to drive around town a little more, but I have several families thru my business who wish they would have listened to me, one with $400k and one with $500k in Indymac that they now cannot get out and the FDIC seems to be shape shifting.

 

 

BofA subpoenaed over sale of securities

Bank of America (BAC, news, msgs) late Thursday said it had received subpoenas from federal regulators over sales of its auction-rate securities.

Auction-rate securities are bonds that are sold at the lowest possible yield that will clear the market; their interest rates are reset periodically. They are long-term securities that act as short-term securities, and the $330 billion market for them, like those for other debt-related securities, crumbled earlier this year.

Bank of America said it is cooperating with the regulators' requests.

A filing with the Securities and Exchange Commission said that four class-action lawsuits have also been filed against Bank of America for auction-rate securities sold between May 2003 and February 2008.

Shares of BofA rose 3 cents to $31.55 this morning.

Earlier on Thursday Citigroup (C, news, msgs) said it reached an agreement with the New York Attorney General's office whereby the bank will buy back $7 billion of auction-rate securities and will pay $100 million in penalties. Regulators said Citi marketed the securities as safe investments and did not tell investors about potential liquidity risks.

Citigroup neither admitted nor denied any wrongdoing.

"The Citi settlement sets a precedent -- not from a litigation perspective but more from a public-relations perspective," Ron Geffner, an attorney with Sadis and Goldberg and a former investigator with the SEC, told MarketWatch.com. "However, I expect that regulators are sensitive to the fact that investment banks' very survival is at risk with the subprime and credit crunch. So regulators may be looking at the viability of the entire industry before exacting a pound of flesh."

And Merrill Lynch (MER, news, msgs) said late Thursday that it, too, will buy back customers' auction-rate securities, about $10 billion worth.

Merrill's move was not a surprise. "When one major firm settles a material piece of litigation, others follow suit pretty quickly," Anthony Carfang, a partner at financial consultant company Treasury Strategies, told Bloomberg News. "It puts pressure on other institutions to make their customers whole."

At least one analyst questioned the attorney general's pressure. "They keep finding ways to attack the industry, and that will drive innovation out of New York City and to London, Tokyo and elsewhere," Dick Bove, an analyst with Ladenburg Thalmann, told The Associated Press.

Shares of Citi were up 40 cents, or 2.2%, to $18.87 in morning trading; Merrill shares slipped 18 cents to $25.92.