By February, the $330 billion auction-rate securities market had collapsed, locking out the nonprofits and municipalities that had used the market for years to issue inexpensive debt, as well as the investors who had purchased it. Indeed, a letter to investors on the website of the New Hampshire student loan group shows that UBS was not a hapless bystander when the auction-rate market failed. The loan group, in its letter to investors, says it agreed to the high emergency rates “at the suggestion of UBS Securities LLC, its investment banker and broker-dealer, in order to respond to disruptions in the auction-rate securities market and attempt to prevent ‘failed auctions. Here in Massachusetts, the City of Holyoke Retirement System, one of the groups involved in the attorney general’s settlement, bought student loan auction-rate securities in December 2007, according to officials there, when UBS was apparently aware that there was trouble afoot in the market. A UBS spokeswoman, Karina Byrne, said, “UBS is committed to addressing our clients’ concerns about the market events that caused the breakdown of liquidity for auction rate securities. read more

Filed in: Cash Lenders