24/7 Wall St.

All of the corporate CFOs and treasurers who bought auction-rate securities from the salesman from their investment banks need a scapegoat. When the credit crisis hit, the financial firms which had kept the market liquid since 1985 walked out. The banks would hold some of the securities between auctions to keep the market trading. With huge losses hitting their P&Ls, the risk was not worth the commissions they earned in the auction-rate market.

When the market dried up, auditors made the CFOs write-down the value of the securities.

A new study indicates that most corporate financial chiefs thought that the value of the securities would be protected if the market unraveled. According to the FT, "More than 85 per cent of companies that invested in the collapsed market for auction-rate securities thought Wall Street banks would provide support during crises." The research was done by the Association for Financial Professionals.

CFOs have themselves to blame. If their boards are troubled by the losses their companies have taken, they have no reason to turn to the banks that marketed the securities.

One of the definitions of a sucker is someone who does not read the fine print. There was nothing in auction-rate contracts which said that the value of the paper would be protected if the market dissolved.

It was just a mad wish by people who thought they could make a little extra money and not take risk in the process.

Douglas A. McIntyre