No mention of the balance-sheet damage this will inflict...
Wall Street banks and brokerages are near a global settlement with regulators over allegations that they misled investors over the sale of auction-rate securities, CNBC has learned.
Oliver Quillia for CNBC.com
A settlement, which could be announced as early as today, would involve such giants as Merrill Lynch MERRILL LYNCH & CO INCMER
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[MER 24.40 -0.48 (-1.93%) ], Wachovia WACHOVIA CORP NEWWB
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[WB 14.85 -1.15 (-7.19%) ], Morgan Stanley MORGAN STANLEYMS
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[MS 39.53 -2.97 (-6.99%) ]. JP Morgan Chase JPMORGAN CHASE & COJPM
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[JPM 36.66 -1.26 (-3.32%) ], Goldman Sachs GOLDMAN SACHS GROUP INCGS
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[GS 163.34 -3.96 (-2.37%) ] and Lehman Brothers LEHMAN BROTHERS HLDGS INCLEH
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[LEH 15.42 -0.79 (-4.87%) ].
State and federal regulators have been investigating whether brokerages and banks falsely told clients that auction-rate securities—a $330 billion market of long-term debt instruments that pay yields reset through weekly or monthly auctions—were as safe and liquid as cash.
The Wall Street firms have agreed in principle to a settlement, where they would pay a fine and reimburse clints who bought the securities. The settlement has not been signed off on by all the state and federal regulators, however.
The settlement would mirror those already reached with Citigroup CITIGROUP INCC
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[C 17.72 -0.82 (-4.42%) ] and UBS UBS AG NEWUBS
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[UBS 19.23 -1.07 (-5.27%) ], according to the office of New York Attorney General Andrew Cuomo.
Combined, the banks agreed to pay $250 million in fines and will repurchase about $27 billion of the debt from their clients.
Cuomo's office, which has invoked the state's powerful Martin Act, has said it wants all banks and brokers to make tens of thousands of U.S. investors whole by repurchasing all of the debt at face value.
—Reuters contributed to this report.
_________________________
“These capitalists generally act harmoniously and in concert to fleece the people, and now that they have got into a quarrel with themselves, we are called upon to appropriate the people’s money to settle the quarrel.”
– Abraham Lincoln, speech to Illinois legislature, January 1837
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