Posted on 08/25/2008 3:13:16 AM PDT by TigerLikesRooster
American investors catch a cold from frozen auction-rate securities
Last Updated: 11:27pm BST 24/08/2008
Serge Birbrair is just one of hundreds of thousands of Americans stung by the securities market scandal. James Quinn reports
All Serge Birbrair wanted to do was to pay his daughter's college fees. For the retiree, who fled the former Soviet Union in 1979, funding his child through university was not only a matter of principle but one of pride. Having saved and invested sensibly for decades, paying the fees should not have been a problem.
But that was before he invested in auction-rate securities (ARS), investments that have seen $675,000 of his hard-earned money frozen, out of reach, in illiquid assets, which he can do nothing about.
advertisementBirbrair is not alone. He is one of hundreds of thousands of Americans caught in the country's ARS scandal, a scandal that has hit the headlines in recent weeks after investment banks such as Merrill Lynch and Citigroup agreed to buy back those frozen ARS from hard-done-by investors.
(Excerpt) Read more at telegraph.co.uk ...
Ping!
I know nothing about this at all. What is ARS and why is this such a bad thing?
... Auction rate securities are similar to ordinary bonds except that the interest rate is set periodically at an auction. In the event that no bidders take part in the auction - which are held either every week, month or 35 days - the entire market for the bonds freezes up. Regulators have accused many banks of playing down the risk of such a seizure in the market......
Bitten in the ARS? Emptor non caveat!
You’ll also find “MARS” for Municipal Auction Rate Securities.
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