WASHINGTON - Sen. Charles Schumer, D-N.Y., yesterday added his voice to those pushing the Securities and Exchange Commission to allow state and local governments and nonprofit organizations to buy back their auction-rate securities without running afoul of the securities laws and triggering SEC enforcement action.
In a one-page letter sent to Erik Sirri, director of the SEC's division of trading and markets, Schumer noted that the SEC has received letters urging it to allow issuers to take this action on a temporary and limited basis to prevent their auctions from failing and resulting in higher interest costs.
"In my opinion, these requests seem highly reasonable and desirable to help ease the severe dislocations currently being experienced in the ARS market," the lawmaker, a member of the Senate Banking Committee, told Sirri, adding: "I would like to know what actions you are currently considering to address the failures in the ARS market...how you intend to respond to the...letters you received, and if you do not intend to adopt the suggestions made in those letters, your basis for so doing."
In a release, Schumer indicated that Long Island's Nassau County is waiting to hear from the SEC before proceeding with selling more than $700 million of revenue anticipation notes to buy back auction-rate securities issued by the Nassau County Interim Finance Authority, to spare taxpayers from $1.5 million per week in "unnecessary financing costs." The authority's auctions of the securities failed, causing their interest rates to jump to 15% from 3% to 4%, he said.
Schumer's action comes after Securities Industry and Financial Markets Association, a group of 14 hospitals in Massachusetts and California, and leaders of the House Financial Services Committee have all sent letters to the SEC urging it to issue guidance that will allow issuers to buy back their auction-rate securities.