The ARPS disaster. $360 billion is tied up in failed auction rate securities.
Harry Newton/Technology Investor/April 10, 2008
technologyinvestor.com
That's more than three times the economic boost Congress is about to send us to save the economy. On my web site, www.AuctionRatePreferreds.org, I've asked people for stories of how their locked-up monies are affecting their lives. I've received dozens of emails. Most repeat a familiar story: They asked their broker for an ultra-safe, cash-like place to temporarily store their money. Brokers lied to them and dumped them into ARPS. And their now locked-up monies are now affecting their ability to buy a new house, a new business, expand the existing one, etc. I've received dozens of stories. The most heartbreaking came in this morning:
Harry,
Thank you for your web site.
I am a single women who by good fortune was able to purchase a home 10 years ago with money from my mother's estate. I have worked in the non profit sector my whole professional life - in service to others. I sold my home in 2007 because I was getting nervous about the economy and as a single woman wanted to be cash strong and debt free. I made a very nice gain on the house and put the cash with Wachovia -- all the money I have and it truly was/is my financial future and retirement. I wanted to buy a new house with cash and have no mortgage, so I put the money with Wachovia while I looked for a house.
I specifically and strongly told the brokers that I wanted the money to be in cash only, money market. Seven days after I had placed my money at Wachovia I got a call. "You have a lot of cash and I can get you a better interest rate and the only difference is you just have to give me up to 7 days notice to access the cash" I was repeatedly assured that this was a totally safe, totally cash placement with the only differences being a slightly higher interest rate and 7 day notice.
I never gave my brokers ANY other information except SAFE, CASH, ACCESSIBLE. I never was informed of ARPS, auctions, put options, and the potential of failed auctions. Does this sound familiar? I repeatedly asked the broker if this was cash, as I only wanted cash with total safety of the principal. Well, as you know I was not in cash I was in ARPS. Yes,my statements said I was in Short Term Preferred (that is Wachovia's justification for not doing anything). I thought it meant a money market like CD. I am not the professional - I thought they were but I was very wrong.
It is interesting that you congratulate Wachovia as I have received nothing but double talk, denial and silence from the branch manager I am involved with and their corporate attorney. I filed a formal complaint and Wachovia's attorney who just let me know (without interviewing me - just the branch manager and brokers) that the brokers did nothing wrong and it was all because the market collapsed without any ability of the brokers to predict the failures and my statements said Short Term Preferred so Wachovia's judgment is that it was beyond their control and my statement showed Short Term Preferred - too bad so sad for me.
In December I retired from non profit work to go back to school for a teaching degree. So, as far as your question goes here is what I have stopped doing and have given up beside being in a constant state of panic especially with a tax bill due by the 15th (what a joke huh - I have to pay capital gains on money I can't access!) So here is what I have given up or stopped doing:
+ I have canceled my land line phone
+ I have stopped going out to eat ( I have gone out to eat 1 times since February 22nd it is now April 9th)
+ I have not bought a book, a piece of clothing or any other non essential item
+ I have canceled by golf membership
+ I canceled a medical procedure because I did not want to spend the $100 copay
+ I canceled a large week long vacation to celebrate my 50th birthday
+ I am seriously considering whether I can continue with my graduate school work (I will have to make that decision by the end of April)
+ I am not going to the movies
+ I keep all of my lights off as much as possible to save on electricity, I literally use candles more than the lights
+ I was in the market for buying a home but have stopped looking
+ I was in the market to buy a new car but have stopped looking
+ I have cut back on driving and only drive when I absolutely must
+ I have cut back on food and only buy what I need to survive (vegetables, dairy etc). I have cut my food bill by 40% since February
+ I have moved out of a paid storage unit and am now storing my belongings temporarily in a friend's garage
+ I have stopped buying family/friends presents and only get cards
+ I changed my hair cutting place (3 years going to the same person) to go some much cheaper and I go only 1x every 2 months
+ I stopped going to the chiropractor (I have a bad back from a sports injury)
+ I stopped getting weekly massages (I have a bad back from a sports injury)
Basically my life has stopped! I do nothing except the minimum to survive. I just want my life back - thanks for everything that you are doing. It is the only place I have found any real hope or help. |
