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Kai Ryssdal: New York Attorney General Andrew Cuomo is set to weigh in on the fallout from the credit crunch. There are reports today he's close to filing securities fraud charges against UBS.
Cuomo certainly wouldn't be the first to accuse UBS of wrongdoing. A number of lawsuits have said that the bank and some other firms misled investors about the safety of a certain kind of investment.
Marketplace's Amy Scott explains.
Amy Scott: The investments in question are called auction-rate securities. They're long-term bonds whose interest rates are set by auction... Or were set by auction. Sales ground to a halt earlier this year after the credit markets seized up. Investors are now cut off from their money.
Attorney Harry Miller represents clients in lawsuits against UBS and other firms that sold auction-rate bonds. He says UBS brokers told his clients these investments were as safe as cash.
Harry Miller: They thought that they would be able to get their money at any time that they needed it and that the only difference was that there was a slightly higher rate of interest on this type of account.
These sales methods prompted the state of Massachusetts to file suit against UBS last month. The state charged the bank with fraud and dishonest conduct.
In New York, the Attorney General's office didn't return calls today. UBS said in a statement that a complaint from New York would be disappointing. It says it's working with regulators. Last week, the bank agreed to buy up to $3.5 billion worth of the securities back from investors.
Matt Fabian follows the bond market for Municipal Market Advisers. He says many banks sold auction-rate securities the same way.
Matt Fabian: It was really similar firm to firm, so you have to expect that these kinds of lawsuits and initiatives will continue or increase over the next few years.
Several states are looking at sales practices at Wachovia Securities. Last week, inspectors raided the bank's St. Louis headquarters. Wachovia says it's cooperating.
In New York, I'm Amy Scott for Marketplace.