The attempt of regional brokerage houses to distance themselves from responsibility from the auction-rate securities calamity received a chilly reception from the New York State Attorney General’s Office. Responding to a letter from Michael Decker and Mike Nicholas, co-CEOs of the Regional Bond Dealers Association, deputy counselor and special assistant to the attorney general Benjamin M. Lawsky bluntly rejected the RBDA’s argument. “It is understandable that the RBDA would want to portray its member firms as innocent bystanders to the rampant fraud in the ARS market,” he writes. “However, we cannot simply assume that your members were duped by the lead manager firms.” The Attorney General’s probe “has already begun to uncover some disturbing facts that seem to belie the innocent picture of downstream brokerages you paint in your letter,” Lawsky continues.
More big fish—Merrill Lynch, Goldman Sachs, and Deutsche Bank—made their deals with Attorney General Andrew Cuomo last week. Some deep sea fishing remains; then it’s onto the lake specimens, given the tone of Lawsky’s letter.