BK224

Retail Investors Stuck Holding Auction Rate Securities

You're dead wrong. The Auction rate market is comprised of individual security issuers and preferred shares of closed end funds. The auction is a pure dutch auction with the auction agent acting as bidder of last resort. I've worked for 2 significant auction dealers and both fully disclose the possibility of failed auctions in the prospectii and marketing material.

The muni market is working out of this market quite quickly as these securities are being called in now. 50% of the issues my clients have been called. I expect the remaining to be redeemed within 3 months.

The real ramifications are economic in nature due to the lack of access to short term alternatives for money market funds, and of course the lock-up of money waiting to get out.

But mark my words, if there is a 300 Billion market of anything out there, some Wall Street Wizard will create liquidity and get in the middle of it to make alot of money. I hope it's me.