Spitzer: No Plan to Probe ARS

Gov. Eliot Spitzer said last week that his administration isn’t looking to investigate the investment banks that pushed auction-rate securities that have driven up debt service costs for issuers as auctions failed in the past three weeks.

“I’m not in that job anymore — a couple of years ago I may have had a different answer,” Spitzer said, referring to his previous job as state attorney general in which he investigated many Wall Street firms. “I’m worried about moving forward and making sure that the credit markets are stabilized.”

Spitzer said he was optimistic about the progress being made to resolve the credit problems, but that he had to be cautious about what he said. 

“These are discussions that are both market-sensitive and ongoing, but obviously my office has been involved through the superintendent of insurance office with the Treasury and the Fed trying to stabilize those markets by taking a look at the capital structure of the bond insurance companies, which have sort of become the fulcrum of this conversation,” he said.

Dormitory Authority of the State of New York executive director David Brown 4th last week criticized investment banks for selling the auction rates and then backing away from supporting them in recent auctions. He said that the agency would consider the performance of investment banks as broker dealers on auctions when allocating future underwriting business. 

Spitzer said the state wasn’t going to revisit transactions or the fees that the banks collected.

“Those were transactions that we negotiated years ago,” he said. “To now look back and say, 'Gee, their advice wasn’t the best,’ that’s not how these things work. We hire the best adviser we can and I’m not going to second-guess that.”

The governor’s comments were made following a speech on his proposed budget to the Association for a Better New York.

 

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