Wells Fargo to Repurchase $1.4 Billion of Securities: WHAT THAT MEANS TO YOU

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You can use this information by establishing “probable cause” in the mind of the Judge or jury right off the bat — we know they lied to investors, are we now supposed to believe they told the truth to the homeowners?

This is the kind of news article buried deep into a newspaper or far down on the list of on-line articles that leaves everyone — homeowners, attorneys, judges, legislators and regulators — in the dark. Wells Fargo is settling one of many claims that it lied to investors about the mortgage backed securities they bought which funded your loan and which filled the pockets of Wall Street “innovators” for years. It doesn’t actually tell us what they lied about — you’ll need to look up the complaint (which I hope someone will do and send to me in pdf format) but it does say that those investors are now paid off in full and that Wells Fargo is buying back what they sold.

Now Wells Fargo will attempt to use that purchase as proof that it is the “INVESTOR” ignoring the ill-gotten gains that preceded it, and attempting to establish itself as the holder in due course, long after the securities were in default, long after the underlying asset mortgages were in default, and long after Wells Fargo received payoffs in credit default swaps that easily cover what they paid the investors and then some.

The point here is that the shell game continues. The regulators are not sophisticated or motivated enough to actually express this for what it is. Even the media gets totally confused. Instead of saying that many loans were paid off or sold back to Wells Fargo for $1.4 billion, it says something about “auction rate securities” which means nothing to practically everyone. What this REALLY means is that you have a defendant (actually several of them — see below) who has actually and demonstrably committed fraud as part of the securitization scheme that funded the financial loan products sold to homeowners — except that so far everyone is concentrating on the fraud on investors. Why is that? The little guy who was lied to, abused and shaken by this ordeal doesn’t matter. It’s just the people with the money that count. You can use this information by establishing “probable cause” in the mind of the Judge or jury right off the bat — we know they lied to investors, are we now supposed to believe they told the truth to the homeowners?

Wells Fargo to Repurchase $1.4 Billion of Securities

Wells Fargo & Company said on Wednesday that it had agreed to buy back $1.4 billion in auction-rate securities it sold to investors before the market for those securities dried up last year.

The decision settles a lawsuit brought against the firm by California’s attorney general, which accused it of violating the state’s securities laws. Wells Fargo, which is based in San Francisco, also agreed to pay the state’s expenses related to the lawsuit.

The brokerage arm of the bank marketed the securities, which resemble corporate debt and whose interest rates were regularly reset by auctions, as an alternative to cash for years, even after analysts warned that the market could freeze up. In February 2008, banks stopped participating in the auctions and effectively locked up investors’ cash.

The suit, brought by the California attorney general, Jerry Brown, contended that Wells Fargo had routinely misrepresented, marketed and sold auction-rate securities as safe, liquid and cashlike investments, omitting material facts.

“Wells Fargo convinced thousands of investors to purchase auction-rate securities with promises of robust returns and liquidity, but when the market collapsed, investors were left out in the cold,” Mr. Brown said in a statement. “Based on misleading advice, investors bought these risky securities. Now, retail investors and small businesses are finally getting their money back.”

Under the terms of the settlement, Wells Fargo agreed to buy back at par value by April 2010 all auction-rate securities bought through its brokerage unit by investors before the market froze up.

About half of the auction-rate securities sold by Wells, which is based in San Francisco, were bought by California residents.

Mr. Brown and Wells reached a settlement agreement Tuesday night, people briefed on the matter said.

The settlement arises in part from an investigation led by Washington State’s Department of Financial Institutions, according to a statement by the North American Securities Administrators Association. Washington State filed an administrative action against Wells before California filed its own case. That matter has also been settled.

State regulators have secured settlements in which banks have agreed to repurchase more than $61 billion in auction-rate securities from investors. Among the firms that have settled these lawsuits are UBS, Bank of America, Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup and Credit Suisse.

Tags: auction rate securities, borrower, credit default swaps, disclosure, foreclosure defense, foreclosure offense, fraud, Investor, mortgage backed securities, securitization, Wells Fargo
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