Sense on Cents

Those who would betray the trust and integrity of a market and investment must be held to account.

Such is the current dynamic within Wall Street’s greatest fraud that encompasses Auction-Rate Securities.

At times, I wonder if I focus too much on the ARS debacle. Then, when I read of the depths of despair experienced by ARS investors, both institutions and individuals, I personally seethe at the injustice of it all.

Bloomberg provides a wide ranging review of institutional investors who were defrauded by Wall Street in purchasing auction-rate securities. Bloomberg writes Wall Street Betrayal Seen in $4.8 Billion Company Debt Losses. The highlights in this article are almost too numerous to single out, but suffice it to say this fraud has likely touched almost every investor in either a direct or indirect fashion.

I am heartened that the fraud is finally receiving significant focus. That said, how will Wall Street be held accountable and how will investors be made whole? Let’s address some specific details as highlighted by Bloomberg:

Bristol-Myers Squibb Co. the New York-based pharmaceutical company, took an 82 percent loss in 2008 when it sold a portion of its auction-rate debt with a $642 million face value.

The maker of Plavix, the world’s second best-selling medicine behind Pfizer Inc.’s Lipitor, continues to hold $169 million worth of auction-rate bonds. It wrote them down by $75 million in the second quarter, according to regulatory filings.

An 82% loss on a supposed cash surrogate! A 44% writedown on cash! (more…)