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Monday, June 09, 2008

Don Quixote and ARS Investors

Recent articles in The Boston Globe and Bloomberg underscore how Wall Street firms woefully favor their own interests at the expense of individual investors.

According to a report in today's Globe, UBS Financial Services warned some of its big investment banking clients of looming problems in the auction rate securities (ARS) market three months before the market for these securities collapsed. Nevertheless, the firm continued marketing the securities as cash equivalents to unsuspecting individual investors.

Adding insult to injury, the Globe and Bloomberg report that UBS, Bank of America, and Wachovia along with others are preventing their clients from unloading auction rate securities at a loss saying – are you ready for this? – it isn't in their clients' best interests!

In an ideal world, it would be nice to believe that Wall Street firms are actually trying to do right by unsuspecting investors whose brokers assured them that auction rate securities were cash equivalents. But Bryan Lantagne, the securities division director for Massachusetts, offers Bloomberg a more compelling explanation:

"By allowing customers to sell at a discount, the banks allow customers to establish damages."

Richard Stahl, a retired New Hampshire car dealer, is one of the auction rate securities victims caught in limbo. The 73-year-old UBS client wants to sell some $650,000 worth of auction rate securities, but UBS won't let him.

"I feel like Don Quixote fighting windmills," Mr. Stahl told the Globe.

Sadly, Mr. Stahl, compared to taking on Wall Street, Don Quixote had it easy.

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Anonymous HarryNewton said...

My name is Harry Newton. I am stuck in Nuveen Auction Rate Preferreds. I believe the ONLY way to solve this and get us our money is to put pressure on the brokers, the brokerage firms and the issuers. All these people and entities need to understand that we will NEVER do business again with them if they don't get us our money back. To coordinate the pressure and help everyone with the latest news on auction rate securities, I have started a web site, called I invite you to visit my site.
thank you,
Harry Newton

12:18 AM  

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