Cuomo secures $850M for ARS buyers

By John O'Brien | Oct 8, 2008


ALBANY, N.Y. (Legal Newsline) - New York Attorney General Andrew Cuomo has reached an agreement with Royal Bank of Canada that will require it to give $850 million back to those who purchased auction rate securities.

Cuomo says nearly $51 million has now been bought back following allegations that banks misrepresented the stability of the ARS market, which fell in February. Auction rate securities are investments that have their interest rates reset periodically by auction.

In making the announcement, Cuomo also advertised a $4.5 billion agreement with Bank of America, though that agreement was reached almost a month ago.

"In today's economic climate, it's more important than ever for investors to be able to access their money. Returning billions of dollars back to investors not only protects their interests but also increases confidence in the entire market," Cuomo said.

"Since the beginning of our investigation into the auction-rate securities market, our objective has been to provide relief to investors who have been unable to sell auction-rate securities as a result of widespread auction failures in Feb. 2008.

"With these settlements, we've returned over $50 billion back into investors' hands, providing relief to the overwhelming majority of individual investors who were fraudulently sold auction rate securities."

Bank of America on Monday announced a settlement worth $8.68 billion with 11 states over the home lending practices of Countrywide Financial Corp., which Bank of America recently acquired.

Countrywide was sued by a handful of state attorneys general who alleged that the lender engaged in predatory lending practices, including misrepresenting loan terms and borrowers' ability to afford loans.

To settle the claims, Countrywide has agreed to provide $8.68 billion in direct loan relief, which includes for $3.5 billion for struggling California homebuyers.

Bank of America will pay a $50 million penalty to the State of New York, and RBC will pay a $9.8 million penalty.

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.

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