Willi

The Scariest Chart Ever

Found an explanation on the FED site, the source of your graph. You need to read the comments below this graph:

research.stlouisfed.or...

The graph is misleading and meaningless because the FED changed how this was measured in 2008. If you scroll down the page it explains the changes made in 2008. You'd think they'd adjust for that or something or not publish the graph as it's meaningless because it measures different things in different years.

Willi

Auction Rate Securities: Who's To Blame?

I also purchased ARS's. I purchased them when I transferred money from a bank money market to AG Edwards. I asked my broker about money market rates and he suggested a SLAR because they pay a slightly higher interest rate. This set up no red flag because the rate was just a small amount higher than their money market. He also told me I would have "immediate illiquidity" which was true at the tine because if I sold, Edwards would immediately credit my account and carry the SLARs on their books until the next auction. This whole transaction was handled through emails, no written materials were supplied, and nothing was signed. Less paper work than opening a money market account.

After the auctions started failing and I asked for a prospectus, my local office didn't have one and it took two weeks for the main office to get me a copy. And a copy it was - 200 pages off a copy machine. Not even a normal prospectus.

Part of the blame for this needs to be placed on the SEC, IMO. In 2006 when they examined ARS auction fraud and fined a number of brokerages, they knew of the "auction" problems and the risks but still chose to allow the brokerages to sell these without providing any written disclaimers, prospectus etc. However, this doesn't excuse the fraud perpetrated by the brokerages in selling these as "money market equivalents", "totally liquid", etc. when they knew this wasn't true.

Edwards/Wachovia still hasn't announced any redemption and I'm still waiting for liquidity in my "totally liquid" SLARs.

Willi