Posted at 4:52 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

  1. If today does not get you wild about the Gold Bank’s unending desire to pick your pocket then you are simply numbed to the experience.
  2. The Gold Banks are losing their rich uncle so today was an act of bravado to show us. It was not oil.
  3. If you have had enough of the gold banks then push back as per yesterday’s second review of taking delivery either of the kilo or 100oz. bars.
  4. Gold is a currency that moves inverse to the US dollar, and will in the main remain so. A change in percentage moves with gold ahead of the dollar in the inverse is possible in 2009.
  5. The dollar rally has been totally technical in terms of international flows of currency that absolutely has no legs to hold it up. Harry Schultz’s call on the USDX topping at or near .88 looks quite good
  6. As far as the depth of the problems goes, it is still bottomless. The following article speaks to this.
  7. The Golden Age of the Financial Criminal, marked by flagrant violations of law and regulations, may be reined in with some spectacular trials.

A credit crater too big to fill?
As the movement of money across borders comes to a grinding halt, governments can only manage the decline. Don’t be surprised to see markets roll back to 1995 levels — or lower.
By Jon Markman

Despite a weeklong surge in stocks, it’s becoming increasingly clear that credit has suffered a catastrophic setback.

It’s as if a set of asteroids hit Manhattan, London and Tokyo, carving a massive hole in the architecture of finance. The initial buildings in the impact crater, Lehman Bros. (LEHMQ), Bear Stearns and Northern Rock, were quickly incinerated. But now the toxic rain and tsunamis that were kicked up are rolling onto the survivors in waves and cutting off their air supply.

New data from world money centers suggest the movement of money around the globe has simply ground to a halt, as institutions in the United States, Europe and Asia that are receiving taxpayer dollars from governments are socking it away to shore up their balance sheets, reserve against liabilities expected in the near future and sustain their unprofitable operations.

“Governments are not really trying to save the system anymore,” said Satyajit Das, a banking expert in Sydney, Australia. “They now realize that’s impossible. They are just trying to manage the decline.”

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Jim Sinclair’s Commentary 

Are you sure your Treasury instrument money market fund is in US Treasury instruments, or are they in OTC derivative based on Treasury instruments? I wager you the latter. The problems out there have no cure without consequences more dangerous than the problems themselves. 

“She said that scrutiny by the SEC and the Fed, and widespread investigations into short-selling practices, are driving the industry to rein in questionable practices with Treasuries.” 

Delivery failures plague Treasury market
Total hit a record $2.29 trillion as of Oct. 1
By Dan Jamieson
October 19, 2008, 6:01 AM EST

The credit crisis is causing a growing number of delivery failures with Treasury securities.

The latest data from the Federal Reserve Bank of New York showed that cumulative failures hit a record $2.29 trillion as of Oct. 1. The federal settlement period is T+1 (trade date plus one day).

The outstanding U.S. public debt is $10.3 trillion.

“Current [fail] levels are at historic levels,” said Rob Toomey, managing director of the Securities Industry and Financial Markets Association’s funding and government and agency securities divisions. “There’s been significant flight to quality” with the market turmoil, he said.

With the strong demand for Treasury securities, “some of the entities that bought Treasuries are not making them available in the [repurchase] market, which is the traditional way to get them,” Mr. Toomey said.  

Unlike some past bouts with high failure rates that involved particular bond issues, the current high fails involve all types of maturities, he said.

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Jim Sinclair’s Commentary

Someone with ethics and understanding would take exception to flushing FASB 157 down the toilet. Doing so would allow Wall Street to go back to good old lying their asses off with regards to the valuation of OTC derivatives. Schiller can look back with 20/20 vision but it is a loser looking forward. Nobody and no formula has a clue what 2011 will look like. Trashing FASB 157 will not simply set back reform, it will kill it stone cold before arrival. Nothing to the Wall Street creeps is temporary. Crime is permanent.

Mark-to-market manipulation
Commentary: Efforts to change accounting rules would set back reform
By David Weidner, MarketWatch
Last update: 12:01 a.m. EST Nov. 4, 2008

NEW YORK (MarketWatch) — Mark-to-market — or fair-value — accounting has one big problem: Some very powerful people are trying to change it.

A movement spurred by bankers including Aubrey Patterson, chief executive of Bancorpsouth Inc. (BXS) and Wall Street power brokers including Blackstone Group (BX) Chief Stephen Schwarzman are arguing for at least a temporary suspension of Financial Accounting Standards Rule 157.

Patterson and other supporters argued for the rule’s suspension in a Securities and Exchange Commission roundtable Oct. 29. Other critics of FAS 157 included Damon Silvers, AFL-CIO general counsel, and Bradley Hunkler, an insurance executive from Western & Southern Life.

Simply put, these guys want the government to stop requiring mark-to-market accounting so the financial industry can put blinders on to the deep trouble that lies on its balance sheets. Not surprisingly, the proponents of a suspension would also apparently benefit from it.

For guys like Patterson, it would mean his bank wouldn’t have to take big charges each quarter to build reserves. Bancorpsouth increased its reserves by 50% to $16.3 million to gird against loan losses at the end of the third quarter.

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Jim Sinclair’s Commentary

Recall what I told you about GE being a major entity in credit default derivatives?

In reading this article, keep firmly in mind no matter how loud the Geeks scream there is no question that bankruptcy takes nominal value to full value. The Geek BS does not work when one party to the special performance contract fails and cannot perform.

Credit Swaps Top $33 Trillion, Depository Trust Says
By Shannon D. Harrington 

Nov. 4 (Bloomberg) — Credit-default swaps totaling $33.6 trillion are outstanding on government debt, corporate bonds and asset-backed securities worldwide, the Depository Trust & Clearing Corp. said in a report that gives the broadest data yet on the unregulated market.

After canceling out overlapping trades, Italy’s government debt tops the list with $22.7 billion in contracts, the report on DTCC’sWeb site today shows. A net amount of $16.6 billion of contracts are outstanding on Spain; $12.4 billion on Deutsche Bank AG, Germany’s largest bank; and $12.1 billion on General Electric Co.’s finance arm, GE Capital Corp., the report shows.

“Publishing this data will provide greater transparency in a critical market,” Tim Ryan, the head of the Securities Industry and Financial Markets Association in Washington said in a statement today. “This is an important initiative upon which the industry will continue to build.”

Before netting, Turkey topped the list with $188.6 billion in contracts, and dropped to $7.6 billion after redundant trades were subtracted. On a gross basis, $15.4 trillion of transactions were linked to individual corporate, sovereign and asset-backed bonds, and about $14.8 trillion was tied to indexes. The New York-based DTCC estimates it sees about 90 percent of all trades.

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Jim Sinclair’s Commentary

This has to be a joke of some kind. In 2006 the cancer of OTC derivatives was growing like a locust storm at Bear Stearns.

NY Fed hires former Bear Stearns chief risk officer
Tue Nov 4, 2008 9:29am EST

NEW YORK, Nov 4 (Reuters) – The Federal Reserve Bank of New York has hired the former chief risk officer of Bear Stearns Cos, Michael Alix, to advise on bank supervision, according to a release in the Fed’s Web site.

Alix will serve as a senior advisor to William Rutledge in the Bank Supervision Group and his appointment is effective Nov. 3, according to the release dated Oct. 31

At Bear Stearns, an investment bank that collapsed in March and has become hallmark of the global credit crisis, Alix served as chief risk officer from 2006 to 2008 and global head of credit risk management from 1996 to 2006.

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 Jim Sinclair’s Commentary

The financial saviour of the planet, the US Federal Reserve, may need to be saved itself much sooner than you or they imagine. A planetary Weimar – it is possible going towards probable.

What Happens when Countries Go Bankrupt?
By SPIEGEL Staff

First it was mortgage lenders. Then large banks began to wobble. Now, entire countries, including Ukraine and Pakistan, are facing financial ruin. The International Monetary Fund is there to help, but its pockets are only so deep.

No, Alexander Lukyanchenko told reporters at a hastily convened press conference last Tuesday, there is “no reason whatsoever to spread panic.” Anyone who was caught trying to throw people out into the street, he warned, would have the authorities to deal with.

Lukyanchenko is the mayor of Donetsk, a city in eastern Ukraine with a population of a little more than one million. For generations, the residents of Donetsk have earned a living in the surrounding coalmines and steel mills, a rather profitable industry in the recent past. Donetsksta, a local steel producer, earned €1.3 billion ($1.65 billion) in revenues last year.

But last Tuesday the mayor, returning from a meeting with business leaders, had bad news: two-thousand metalworkers would have to be furloughed. Lukyanchenko doesn’t use the word furlough, instead noting that the workers will be doing “other, similar work.” But every other blast furnace has already been shut down, and one of the city’s largest holding companies is apparently gearing up for mass layoffs.

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Jim Sinclair’s Commentary

Now the fun really starts because the statute of limitations hasn’t stopped. I am bullish on public companies that specialize in building Federal prisons and bearish of Greenwich, CT mansions valued over $20,000,000.

Now That Election Is Over, Its Back To The Crisis
Danny Schechter
Posted November 4, 2008 | 06:55 PM (EST)

The election is all but over, but the debate over who is responsible for the financial crisis is just beginning to become more intense.

We know that the FBI has opened a criminal investigation of 26 companies, indicted 400 mortgage scammers and started 1400 criminal white collar cases There are 40 task forces allegedly looking into the fraud at the heart of the subrprime pyramid scheme.

But now we also know that the Bush Administration has made a the prosecution of white collar crime a lesser priority with more agents tasked to chase terror suspects than the men and women who brought our economy down.

Reported Newser:

“A short-staffed FBI is laboring to keep up with white collar crime linked to the nation’s financial crisis, the New York Times reports. FBI officials predicted millions of dollars’ in mortgage fraud years ago, but the Justice Department wanted agents focused on counter-terror. When the FBI warned of a fraud “epidemic” in 2004, only 15 of its 13,000 agents were on the case.”

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Posted at 1:28 PM (CST) by & filed under General Editorial.

Dear Friends,

There will be many forecasting market results of the election of President Obama. I suggest we wait to see his cabinet in order to look to the future with any degree of accuracy.

What we do know is:

  1. Many of the evil money ruler geniuses are out of the lime light.
  2. Even if Wall Street is still pulling strings, this Administration will not have Paulson who jiggled every market on the planet fairly well.
  3. The PTT team, if it exists, will be made up of lesser lights because the past Administration ruled that.
  4. All the problems are still out there as virulent cancers that have spread out of control in the financial market and are not operable. Thank you all you OTC derivatives that up to now have not been singled out to accept blame. This could change but do not count on it.
  5. You can count on fiscal stimulation as it is a tenet of how the Democratic mind moves.
  6. You can count on higher taxes for Daddy Warbucks and reductions for the ordinary man who carries the Federal Budget money-wise.
  7. You can count on an interesting period in terms of geopolitical challenges to the USA from their many enemies in order to size up the new leadership.
  8. You can count on meaningless dialog with all those about to test the new Administration geopolitically.
  9. You can count on gold at $1200 and then $1650.
  10. You can count on the US dollar trading at USDX .72, .62, and.52.
  11. You can count on the reestablishment of social and economic safety nets.
  12. You can count on the now shredded Constitution remaining shredded. Once power comes into an Administration it stays their permanently.

Respectfully yours,
Jim

Posted at 12:48 AM (CST) by & filed under Guild Investment, Jim's Mailbox.

Dear Jim,

One need only read the following article to see the absurdity of the proposition that the US dollar can stay strong. The interest on this $2.1 Trillion [so far] or excess debt alone will eventually swamp the budget. It is absurd and highly correlated with US money coming back to the US from overseas investing and foreign money coming to the US for a safe haven during a crisis. These are short term events, the dollar’s day in the sun is drawing to a close and soon it will reverse. By the way, after 9/11 the dollar rallied for 4 months and then fell for 7 years. Thus far the dollar rally is about 3 1/2 months old.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

RPT-PREVIEW-US Treasury to expand debt arsenal as deficit rises
Tuesday, November 04, 2008 5:00:06 AM (GMT-08:00)
By David Lawder

WASHINGTON, Nov 4 (Reuters) – Facing the need to borrow up to a staggering $2.1 trillion in the current fiscal year to fund economic rescue programs, the U.S. Treasury is expected to significantly expand its debt securities arsenal.

Analysts anticipate that the Treasury on Wednesday will announce the return of the 3-year note and adopt more frequent offerings of 10-year notes and 30-year bonds. It may also consider more reopenings of shorter maturities.

“They are going to pull out all the stops. There’s a good chance they’ll come back to a quarterly 3-year note, monthly 5-year (note) auctions and increase issuance pretty subtantially across the board,” said Kim Rupert, head of global fixed-income analysis at Action Economics in San Francisco.

The Treasury Department said on Monday it would need to borrow a record $550 billion in the October-December quarter, including a likely $300 billion in financing for Federal Reserve liquidity operations.

The total was $408 billion higher than previous estimates announced in July 2008 due to outlays for economic assistance programs, lower tax receipts and lower issuance of non-marketable debt securities to state and local governments.

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Posted at 6:40 PM (CST) by & filed under General Editorial.

Dear CIGAs,  

Here is some information for all of you to help us recapture the price from the gold banks.

Contracts: An Overview

Contracts are promises that the law will enforce. The law provides remedies if a promise is breached or recognizes the performance of a promise as a duty. Contracts arise when a duty does or may come into existence, because of a promise made by one of the parties. To be legally binding as a contract, a promise must be exchanged for adequate consideration. Adequate consideration is a benefit or detriment which a party receives which reasonably and fairly induces them to make the promise/contract. For example, promises that are purely gifts are not considered enforceable because the personal satisfaction the grantor of the promise may receive from the act of giving is normally not considered adequate consideration. Certain promises that are not considered contracts may, in limited circumstances, be enforced if one party has relied to his detriment on the assurances of the other party.

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Jim Sinclair’s Commentary

The following is a review of the conditions of COMEX Rulebook Chapter 113 that constitutes the contract between buyer and seller on the COMEX gold contract.

Delivery cannot be denied legally to any party of any definition that is on the long side of the delivery and is prepared to make full payment by having those funds available at his brokerage firm.

A default by the COMEX has nothing to do with a financial failure but rather a failure to perform according to the contract by making delivery.

That violation of obligation would result in cash only trades with 100% margin and would destabilize and stop the Gold Bank’s ability to own the price.

If you are tired of being had by paper gold the following is the only course of action if you wish to take a positive step to end the games being played at your expense.

Delivery Process for Gold or Silver:

Delivery – Prudential holds the receipt in PFG’s account for customer 

  1. Client buys the futures contract.
  2. Client will take delivery between First Notice Day and the Last Trading Day.
  3. On delivery day account is debited cost plus a $50.00 delivery fee.
  4. Receipt is booked to customers account
  5. Monthly storage charge passed on to customer’s account(about $50.00).

Physical Delivery – Customer wants bars in their procession

  1. Client buys the futures contract.
  2. Client will take delivery between First Notice Day and the Last Trading Day.
  3. On delivery day account is debited cost plus a $50.00 delivery fee.
  4. We will provide the customer with name and phone number of the individual at the depository to contact.
  5. Customer makes arrangements for the physical delivery

CIGA JB Slear, who is in the commodity business, offers his services to assist anyone seeking physical delivery of metals. He will guide you through the entire process, including arrangements for delivery.

To be totally clear, I expect JB not to discuss any type of speculation with you but ONLY help you acquire 100 ounce gold bars. Once 21,000 bars have been taken the paper gold’s reign over the price of gold is over.

CIGA JB Slear can be reached at the following:

Fort Wealth Trading Co. LLC
www.FortWealth.com
866-443-0868
ext 104

 

The COMEX contract you are party to when long gold in terms of delivery which must be adhered to or default occurs. There is legal remedy for this default.

 

COMEX Division – Gold Rules

113.01 Tenderable Gold
113.02 Approved Refiners; Licensed Depositories; Licensed Weighmasters; Approved Deliverers; Approved Assayers
113.03 Weight Certificates and Assay Certificates for Gold
113.04 Packaging of Tenderable Gold
113.05 Storage of Gold
113.06 Gold Deposit Annual Audit Procedures
113.07 Form of Gold Contract
113.08 Delivery Months and Days for Trading in Gold
113.09 Price Multiples for Gold
113.10 Deleted
113.11 Delivery Notice for Gold
113.12 Delivery of Gold

113.01 Tenderable Gold

In fulfillment of every contract of gold, the seller must deliver 100 troy ounces (5% more or less) of refined gold, assaying not less than 995 fineness, cast either in one bar or in three one-kilogram bars by an approved refiner. The weight, fineness, bar number and identifying stamp of the refiner must be clearly incised on each bar by the approved refiner. 

113.02 Approved Refiners; Licensed Depositories; Licensed Weighmasters; Approved Deliverers; Approved Assayers

(a) The Board Trade Group, upon the recommendation of the Committee on Precious Metals, shall designate as approved refiners those gold refiners whose gold bars shall be accepted as tenderable gold in connection with deliveries of gold in fulfillment of an Exchange contract for gold. Additional approved refiners may be designated in the same manner from time to time. The Board Trade Group may also terminate the designation of a gold refiner at any time as an approved refiner, and from and after the date of such termination, gold produced by such refiners may not be placed in a licensed depository for delivery in fulfillment of an Exchange contract for gold. Neither the addition nor deletion of a gold refiner as an approved refiner shall be deemed to affect the amount of money to be paid or the grade or quality of gold to be delivered in fulfillment of an Exchange contract for gold, and shall be binding upon all contracts entered into before as well as after the adoption of any such change, anything in these Rules to the contrary notwithstanding.

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Posted at 4:16 PM (CST) by & filed under In The News.

Dear CIGAs, 

The last pillar required for a massive gold move is the 30 year USA long bond breaking below its 35 year up trend line.

The most important points: 

“America is bankrupt. American government bonds are extremely overvalued. “The world’s last bubble.” America is in debt for over 13.000 billion (13 trillion) dollar and adds a 1.000 billion dollar debt each year. According to Rogers this can not continue for long. Therefore, he went short in long-term US goverment bonds. “These bonds have peaked.” By the way: Rogers owns Dutch government bonds. “They are safe.”

“The fact that the dollar is gaining rapidly is only temporary”, Rogers says. “All hedge funds were short on the dollar and because of the appreciation of the dollar there is a short squeeze for the dollar. Managers have to close thier positions and they have to buy dollars instead.” “This is temporary, within a year you have to get rid of the dollar. Fundamentally it is a drama.” 

Jim Rogers: America is bankrupt (English version)

America is bankrupt, according to investment legend Jim Rogers. “The American government bonds are the world’s last bubble and the price of commodities has to increase.”

Charismatic
The famous and charismatic investor, guru if you will, Jim Rogers, visited ABN Amro Netherlands last Friday. RTL Z was at ABN headquarters as well and recorded a number of statements, investment tips and opinions about the world economy.

Rogers
During the seventies Jim Rogers (66) managed a successful hedge fund with George Soros. After that, he traveled and went into commodities. Click here for the wikipedia entry for Rogers. 

Last Friday Rogers went at it in front of a roomful of ABN private banking clients. We had an exclusive 15-minute interview with Rogers.

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Jim Sinclair’s Commentary

More from Pakistan. The drones did it. 

Pakistan condemns U.S. missile strikes
SAEED SHAH
November 3, 2008 at 10:39 PM EST

ISLAMABAD – Tensions increased between Pakistan and the United States Monday when President Asif Zardari and other officials roundly rebuked American military commander General David Petraeus over U.S. missile strikes inside Pakistan.

Gen. Petraeus, credited with pulling Iraq away from the brink, has now been charged with developing a strategy to rescue the war in Afghanistan. He has overall charge of the Middle East and Central Asia, including Iraq and Afghanistan, as head of U.S. Central Command, and made Pakistan his first visit to the region.

Pakistan’s co-operation is considered vital if the Taliban insurgency in Afghanistan is to be quelled, but Islamabad has been incensed by U.S. missile attacks inside its territory against suspected militants. 

Mr. Zardari told Gen. Petraeus, according to a statement issued by the President’s office, that “continuing drone attacks on our territory, which result in loss of precious lives and property, are counterproductive and difficult to explain [for] a democratically elected government. It is creating a credibility gap.” on those bombing drones.

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Jim Sinclair’s Commentary

When the lower rate is so desirable I imagine the feeling among regulators, officials and of course the obedient brown nose media is that of “who cares.”

Note there is no media coverage of the strong doubt remaining amongst rational people that Lie-bor, as a tool of the bankers, does the necessary in the best interest of those who report their cost of dollars that constitute the much watched Libor rate.

Maybe they will declare Libor at ½ percent soon.

London Interbank Offered Rate (LIBOR)

Definition:
Interest rate at which the London banks are willing to offer funds in the inter-bank market. LIBOR is the average of rates which five major London banks are willing to lend $10 million for a period of three or six months, and is the benchmark rate for setting interest rates for adjustable-rate loans and financial instruments.

Link…

 

Bankers Cast Doubt On Key Rate Amid Crisis
By CARRICK MOLLENKAMP

 LONDON — One of the most important barometers of the world’s financial health could be sending false signals.

In a development that has implications for borrowers everywhere, from Russian oil producers to homeowners in Detroit, bankers and traders are expressing concerns that the London inter-bank offered rate, known as Libor, is becoming unreliable.

Libor plays a crucial role in the global financial system. Calculated every morning in London from information supplied by banks all over the world, it’s a measure of the average interest rate at which banks make short-term loans to one another.

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Lie-bor?
by Jeffrey Cane  Apr 16 2008

Questions grow about a major rate.

One of the arcane financial acronyms that has gained much prominence over the course of the credit crisis is Libor-the London interbank offered rate. It is the average interest rate when banks make short-term loans to one another.

It is one of the most important credit benchmarks, used by banks and financial institutions around the world.

Carrick Mollenkamp of the Wall Street Journal reports that there are growing suspicions that some banks may be underreporting the rates they are paying for short-term loans, undermining the accuracy of the Libor. 



His report is a startling revelation. If the Libor is viewed as unreliable, the credit crisis may be much worse than previously thought, with borrowers receiving loans tied to the index getting a cheaper rate than they should.

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Jim Sinclair’s Commentary

Brokerage full service retirement plans will be retired before you will. Gold is all that will protect your retirement.

Lehman Good-for-Retirement Notes Worth Pennies for UBS Clients
By Bradley Keoun and David Scheer

Nov. 3 (Bloomberg) — UBS AG, Switzerland’s largest bank, faces dozens of claims in the U.S. from clients who bought “100 percent principal protected notes” issued by Lehman Brothers Holdings Inc. that are now almost worthless.

Six attorneys hired to represent clients in the cases say UBS brokers touted the so-called structured notes as low-risk investments and failed to emphasize they were unsecured obligations of Lehman, which filed for bankruptcy in September. State regulators are fielding so many calls about Lehman’s notes they’re considering a task force to investigate the sales, said Rex Staples, general counsel for the North American Securities Administrators Association Inc., a group of 67 state and provincial regulators based in Washington.

“The sales pitches were that it’s good for retirement accounts, and good for the safe, fixed-income part of people’s portfolios as an alternative to owning stocks, because it’s less risky,” said Seth Lipner, a lawyer in Garden City, New York, hired by two holders of Lehman notes sold by UBS, including a 65- year-old accountant who says he lost $1.4 million in retirement savings. “Of course, it turned out to be more risky.”

Any awards for investors would add to the financial industry’s burgeoning costs for compensating individuals who bought supposedly safe investments that crumbled in the credit crunch. Banks and securities firms, including Zurich-based UBS, Citigroup Inc. and Merrill Lynch & Co., already have had to swallow more than $3.6 billion in fines and market losses on auction-rate securities they had to buy back from clients under orders from the U.S. Securities and Exchange Commission and regulators in New York, Massachusetts and other states.

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