Morgan Stanley, JPMorgan on Auction-Rate Probe Hot Seat

As New York AG Andrew Cuomo's office continues applying heat, banks are scrambling to react to the auction-rate securities crisis, the Wall Street Journal reports. Morgan Stanley said yesterday it will buy back about $4.5 billion of the illiquid securities—but a Cuomo spokesman called the move “too little, too late.” JPMorgan Chase and Wachovia are the latest institutions under new scrutiny.

New York is pursuing about 30 banks ensnared in the auction-rate dealings, and other states as well as the SEC are investigating. UBS, Citigroup, and Merrill Lynch agreed to buy back more than $36 billion of the securities last week, and Goldman Sachs, Bank of America, Lehman Brothers, and Wells Fargo are all targets of the investigation. (More auction-rate securities stories.)