UBS Agrees to $19.4B Auction-Rate Bond Buy-Back

By Clay Dillow,  Newser Staff
Posted Aug 8, 2008 10:56 AM CDT
Citigroup will pay $7 billion to investors who bought auction-rate securities from the firm even after the market began its collapse.   (AP Photo)
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(Newser) – UBS, pressured by state and federal authorities, has agreed to buy back $19.4 billion in risky auction-rate securities that were widely sold as cash-like and safe, the Boston Globe reports. The market for the securities, which are a type of bond sold by non-profits, art institutions and local governments, collapsed in February. The Swiss bank will also pay $150 milion in fines, split between New York and Massachusetts.

Regulators in several states have filed actions against firms dealing in auction-rate securities, charging that they kept selling them even when they knew the bottom was dropping out of the market. Yesterday, Citigroup agreed to buy back almost $20 billion of the bonds, and Merrill agreed to buy back $10 billion.