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Smith first on Fox Business.
It's payback time today in many ways but let's get to Morgan Stanley it has agreed to pay one point five million dollars to reimburse investments in auction rate securities.
By two Massachusetts cities this is just the latest repayment the commonwealth -- having already obtained nearly fourteen million for Merrill Lynch.
And then 41 million up from UBS.
We bring in Martha Coakley she's the Massachusetts attorney general garner now to discuss the next move here welcome and thank you for joining us.
We proceed to an -- -- afternoon.
Okay let's talk about the Morgan Stanley would take these one at a time tell us about this settlement in the grand scheme of things it's chump change one point five million dollars spectacle of the money go back municipalities correct.
It it goes back directly does -- -- New Bedford in the town of Hopkinton and and frankly over a million dollars to New Bedford it's a significant amount for them that's -- on top I guess I was talking about on the on behalf of the the investment banks so.
They're not calling this sort of a penalty they say it's a settlement and there are cooperating are you happy with your dealings with Morgan Stanley.
Yes we are and that's correct they have cooperated we began an investigation.
On they agreed because we head -- as we did in the other cases you just mention.
That at least Massachusetts it is on face.
To sell to cities and towns auction rate securities primarily because of their lack of liquidity.
And so when confronted with that they recognized.
They should reimburse the cities and towns they did that in in this instance they've agreed to review their portfolio should there be other entities that they owe money to.
In Massachusetts they've agreed to pay -- -- -- I think it's a fair settlement.
Four on Massachusetts and for the cities and towns involved.
And yes they have a statement here from Morgan Stanley quote we are pleased to settle this matter without penalty so clearly they are working with -- That's correct somebody said to me you know -- Martha Coakley.
The ego of attorney -- I'm not saying -- you but we have a lot of attorney attorneys general in the past who have.
Made big noises I'm talking about Eliot Spitzer of course and made a lot of moves here that it wrestle money out of these companies but a shot from that.
What is the benefit of going after these companies.
Well depending on face it is what it is we believed that the cities and towns weather was intentionally or unconsciously.
-- I'll -- into buying products that they shouldn't have -- was illegal and then they lost particularly in this economy.
Monies that were crucial for the kinds of things that cities and towns are paying for education schools roads.
To be able to get this back without protracted litigation.
Is a huge boon for our municipalities.
And for the commonwealth and indeed in the UBS settlement.
We also agreed on -- amount of money that was going to go to the commonwealth and some -- that would be used to do more training around.
-- financial sophistication for some of our treasurers and financial officers and our cities and towns so barrel UBS Morgan Stanley.
Do you have another bank investment bank brokerage in your sights right now.
Well frankly we've been focusing on the kinds of securities as opposed to who the seller was and that's why.
Our investigations have come to -- we've looked at what kind of securities have been sold these cities and towns is there a claim.
On behalf of the dole was by the commonwealth.
That's what we focused on we don't believe we're done yet but we don't have any particular.
Broker or bank or financial house in our sites but we are going to continue to monitor what's been sold to cities and towns in Massachusetts.
In what should be returned in to -- we.
I think we've had good success in focusing on.
Those companies were those kinds of securities have been sold so if I'm hearing you correctly the municipalities are coming to you saying we think we were duped.
And that's when you go after these banks and brokerages exactly after looking at the facts and circumstances the type of products sold them the representations or some instances we believe misrepresentations.
About those kinds of securities and that's what we will continue to do on behalf of -- cities and towns here let.
Me just bring up the fact that there have been widespread failures in different parts of all kinds of financial instruments over the past year and a half as you've seen.
We've had collateralized debt obligations foreclosures sub prime.
Mortgages that have been packaged work coming up on packaging of credit card debt that was sold to other investors that's going to be a whole different -- that's going to.
To be the sort of adding to this story.
At what point do you say look.
These investors came to these banks and brokerages and said.
Give me something risky that'll make me a lot of money and -- to a certain extent what I'm getting at here is that it's it's partly the investors' fault as well.
And I don't you know opened and have the answer to that you you've mentioned.
You know the -- he collateralized mortgage is we've done a lot of work here trying to change the regulations to prevent that kind of odd behavior by brokers.
On in the future and we're working on trying to get some of those.
Those mortgage jurors two basically restructure but having said that you know we don't oversee or regulate financial products or houses we look at this from a consumer point did you.
On there is lack of regulation on these when there's no one kind of watching what's happening now whether it's of the federal level -- the state level this is the kind of catastrophe I think that you start to sow seeds in an economy and so what the state level we are preempted from doing many kinds of regulation.
On and so we look at the piece that weekend.
Have some impact on what are consumers doing -- and certainly in this instance cities and towns are not what we're talking about in terms of sophisticated investors willing to make big investments to get returns.
On we think they were treated unfairly and that's the way we proceed.
When we're gonna do an investigation -- look for a settlement.
All right Martha Coakley Massachusetts attorney general we appreciate you coming on in the next time you've got something to tell our viewers please come back thank you had looked at them back here --
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