I was late to the party on the collapse of the auction rate securities market, blog-wise, as the story broke long before I started.
Dunstan McNichol's article today on Bloomberg.com is a good place to get caught up since it covers the emerging damage done to several A-list businesses due to misuse of the financial instruments.
He neatly captures the core of the problem - which was that these vehicles were being used like money market funds and once the illusion of safety was shattered, nobody wants to restart the market, leaving everyone who owned one before the crash with literally no way to unload them at any price.
So many companies have lost so much money that the lawsuits are being applied by fire hose, and McNichol does a good job of cataloging the suits and providing each side a chance to explain its position (loosely summarized as, "you told us this would be safe," and "you [messed] up, you trusted us," respectively). The plaintiffs got the better of the exchange because they spoke directly to the reporter while the investment advisers issued generic statements through lawyers. While you need to be very careful about not saying anything that will upset a judge at this stage of a litigation, a direct statement to the effect of "We marketed this instrument to sophisticated buyers who had access to the best legal and financial counsel available. We also lost substantial sums in the market turmoil and our mutual focus would be better served by looking forward rather than backward," would have been better.
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