Merrill, Citigroup to Buy Back $30 Billion in ARS

New York (HedgeCo.Net) – Merrill Lynch and Citigroup, two banks that have already written down billions in losses, will buy back $30 billion in auction-rate securities as part of an agreement with regulators. 

This comes after the threat made by New York Attorney General Andrew Cuomo, who said he would sue Citi for misleading trusting investors about the high risks associated with such securities. 

Merrill then followed suit, and other big names firms like Morgan Stanley and Bank of America are expected to strike their own deals with state regulators and the SEC in the near future.

These securities, which accounted for nearly $350 billion, are backed by municipal bonds and other forms of debt, and were peddled as being “safe.”  However, the credit crunch blindsided most banks, and those securities were quick to plummet in value. 

Citi has to shell out the most cash, agreeing to purchase $7.5 billion in securities and promised to purchase another $12 billion from institutional investors.  On top of it all, they were slapped with $100 million in fines.  Merrill has agreed to buy back $10 billion in the auction-rate securities.    

Julie Scuderi
Senior Editor for HedgeCo.Net

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