Auction rates securities settlements in perspective

The news that Citigroup and Merrill Lynch will reimburse individual investors burned by auction rate securities to the tune of $17 billion is certainly eye-catching. The New York Times notes that the Citigroup action (Merrill's offer was not part of the settlement) represents "among the largest amounts ever recovered by investors from a single company as a result of regulatory action." Morgan Stanley got in on the act, agreeing to reimburse some small towns in MA. These actions set a precedent of sorts for other banks--Lehman Brothers, JPMorgan Chase, Wachovia, Bank of America and others--that are in similar straights due to their marketing of ARSs. All of this will affect the bottom line, and hopefully it will end the matter. What remains to be seen is whether Citigroup's $100 million penalty reflects a premium over other penalties given the alleged destruction of relevant evidence.  

For more:
- here's the article

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