Thursday, August 7, 2008

Citi and Now Merrill

Citi and Merrill are making the buyers of auction rate securities whole, even though the product was in no way guaranteed. This whole mess is, well, a mess.

The financials are clearly in the crosshairs as the regulators are breathing down their necks. They sold a too-good-to-be-true deal and the buyers are getting off the hook. Cash is cash. ARS's are not, were not.

The fact that the financials are willing to roll over on this is sad. My view is that the regulators are taking way too much liberty. If it turns out that the brokers lied when selling this paper, then that's another story but I was at one of these firms for years and they never rolled over on anything.



Long MER

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