Auction gavel
Auction gavel - 
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Kai Ryssdal: State and federal regulators are close to forcing a thaw in one part of the credit market that's been frozen for months now. CNBC and Reuters are reporting that as many as six big Wall Street banks would be part of the deal on auction-rate securities. The auction-rate market, as we've been telling you, has been stuck since this spring. That's left investors big and small saddled with bonds they can't unload. Our Senior Business Correspondent Bob Moon has more.

Bob Moon: Auction-rate securities were pitched as a safe short-term investment that pays a higher interest rate than U.S. treasuries. But the banks are accused of misleading investors that they could get their money quickly when they needed it.

Regulators have already reached buy-back settlements with Citigroup and UBS. They've agreed to pay a combined total of $250 million in fines and buy back roughly $27 billion of the debt from their customers. James Cox is a securities law professor at Duke University. He says rival investment banks haven't just been getting pressure from regulators, he's heard their own sales departments have been screaming.

Cox: The brokers obviously have a dog in this fight. Their dog is not so much the fact that they have any legal exposure, but the fact that they have -- this product has created a lot of bad will among their customers, and the brokers, of course, would like to get those customers back and trading with them.

Cox says a global settlement will assure the banks that they'll all be treated equally in putting the mess behind them. And securities law attorney Jake Zamansky says the customers should be treated equally, too.

Jake Zamansky: I've heard from investors all over the country, who have accounts at many different banks, all saying the same thing. They were lied to about liquidity; the firms put their own interest ahead of the customers'. So it's important to have a global settlement, because the problems weren't confined to just a couple of firms; it was across the board.

The settlement could also end up affecting the hit other investors will take. Since big corporations and pension funds also had money in these securities, their bottom lines stand to suffer.

I'm Bob Moon for Marketplace.