Auction Rate Securities Problem Ends As It Began - quietly

For me, the auction rate security problem was the cause of many sleepless nights. In the middle of February, my broker suddenly let me know that all of my cash which he had advised me to move into auction rate securities over the last several years, was illiquid until further notice. He told me that the auctions had failed and that I would be getting higher rates to compensate me for my loss of liquidity. He could not assure me when I would get out of these bonds which led to many sleepless nights as I needed the liquidity.

As the months rolled by, the excuses mounted, as did the obvious and clear indicators of impropriety on the parts of all of invvestment banks (see some of the earlier acticles posted by me and others on BestCashCow.com). Little by little, one by one, many of these things got called away. It started with the municipal and state issues that did not want to, or could not, pay the heavy default rates, and earlier this month, some of the major financial institutions that use auction rate preferreds to leverage their portfolios, including Nuveen, finally gave into the court of public opinion and got rid of theirs.

I understand that Pimco and Blackrock still have not agreed to refinance or refund the holders of their crooked issues. Folks at these organizations should be ashamed that they are continuing to force investors to be illiquid so that they can get higher returns. I believe that they soon will come under pressure to get rid of their auction rate preferreds, leaving these instruments to be a remnant from 2008.