Citigroup and UBS made nice with the SEC, the New State Attorney General’s Office, and some other states last week. The banks will buy back billions of dollars of auction-rate securities, and will pay hefty fines; in return government litigation will be put to rest.

Elsewhere, Morgan Stanley reached a repayment deal with New Bedford and Hopkinton to quell the anger of the state of Massachusetts. But Merrill Lynch is having more trouble settling the matter even though it’s pledged to buy back billions of dollars of its ARS; the states and the SEC are not impressed, at least not yet. Massachusetts’ Secretary of State William Gavin seems unwilling to let Merrill off the hook because the investment bank allegedly rewrote research in an effort to hawk the degraded product. “We’re not commenting on regulatory matters,” a Merrill spokesman noted.

At last count around 12 companies were being eyeballed by state and Federal investigators about the ARS collapse. A spate of repurchase announcements may now be expected, along with much state and federal self-congratulation. And at least some of the class action and other private lawsuits are expected to keep haunting the ARS purveyors. 

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