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| Soap Opera: Auction Rate Securities
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It may not be the latest on your favorite movie star, but, there is not going to be a similarity between you and that star anyway so why not follow the money....In the latest soap opera of money, papers are reporting about auction rate securities. First response YAWN....but wait a minute, there are some unhappy rich people out there and it looks like they're crying and it looks like they're nervous and yup, they're going to sue....
From what I can gather, it is a story of betrayal. Rich people and organizations bought auction rate securities, they thought they could shelter some of their money from taxes and earn some interest and sell those instruments for cash when there were auctions...buyers and sellers who bid on the interest rate. The auctions do not tie money up for a long time conceivably because there are buyers and sellers, right? Well, some big deal auction failed...the sellers could not sell their securities for lack of buyers. Also, when the auction fails they cannot get their money out of the security. So why is this interesting?
The recent flood of lawsuits against financial institutions, insurance companies and brokerage houses is based on a very basic idea: You tricked us. Like in everyday life being tricked doesn't feel good and often costs money. While oridinary middle class people are often blocked from pursuing fairness because of the cost of hiring firms and experts to sue larger entities, richer people have access to these routes. There are things to be learned and in terms of "getting even", these financial situations are the best way to observe how things get done, and in the end, it's not hurt feelings, it's not talking smack, and it's not being depressed, it's working within the system and finding your in...how you can use your resources to try to make things right.
This scenario is being touted as part of the credit crunch that we're all hearing about. Because the securities owners cannot sell their securities, they're getting higher interest. The higher interest doesn't fix the problem that they cannot liquidate the securities and get their dollars. Sort of like missing a credit card payment and watching your interest payments soar. What do you do? Sort of like banks lending money for mortgages that people can't pay back. The message is the same, when you make an agreement, what can you do if someone breaks his word? The financial markets are telling us....first, try to protect yourself by making a good deal, second, if you sign something understand that what's being said isn't what counts, it's what's in the agreement, third, suing someone for ripping you off is not a bad idea, and finally, be careful what you put in writing. Now even if this is boring, doesn't it have more to do with your own life than hearing about Paris Hilton?
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Posted by conoutofconsumer on 2008-02-15 10:11:36 | Rating: | Views: 90
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