ev

The Untold Story of the Auction-Rate Securities

If I understand this, the assets backing many of the illquid ARS are preforming well, with an exception to the high risk securities that the issuers of, simply have too good a thing going to consider refinancing. Yet the illquidity in the auction market is in essence resulting in failures of the market, and much like a small business that may not be able to meet current obligations because funds are tied up in inventories that are not moving, the holders are concerned for getting inventories of ARS off their books, compounding the failure of auctions.

Would the institutions being required to buy back these preforming instruments back relax the pressure on the auctions to preform, helping to stabilize the market for ARS and be the beginning of an end to the current credit crunch in other markets as well?