Nov 18, 2009 1:11 pm US/Pacific
Wells Fargo Agrees To Buy Back Soured Securities
SAN FRANCISCO (CBS 5 / AP / BCN) ―
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Exterior view of Wells Fargo Bank in San Francisco.
AP
Three subsidiaries of San Francisco-based Wells Fargo & Co. have agreed to repay customers about $1.4 billion to settle a lawsuit alleging the company improperly marketed risky investments as safe.
But the banking company did not admit any wrongdoing in the settlement, announced Wednesday.
California Attorney General Jerry Brown sued the bank's affiliates — which are Wells Fargo Investments, Wells Fargo Brokerage Services and Wells Fargo Institutional Securities — in April over its sale of so-called auction-rate securities that soured.
The investment resembles corporate debt, except that interest rates are frequently reset at auctions.
The suit alleged that Wells Fargo violated California's corporate securities law by routinely misrepresenting, marketing and selling the auction-rate securities as liquid investments.
A number of companies, charities and individual investors were told the securities were as safe as cash, Brown said.
But the $330 billion market collapsed in February 2008, and investors' accounts were frozen.
Wells Fargo has now agreed to buy back, at face value, securities its customers nationwide purchased before Feb. 13, 2008, including about $700 million from California investors.
"This is good news for thousands of people in California," Brown said Wednesday, speaking at a news conference at his office in Oakland.
Wells Fargo is one of more than a dozen financial firms that have agreed with regulators to buy back the risky investments, which lost most of their value when the market for them evaporated as the credit crisis worsened.
Financial companies have agreed to repurchase more than $61 billion in the securities.
A Wells Fargo spokesman said the company would comment later on the settlement.
(© CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed. The Associated Press and Bay City News contributed to this report.)
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