The Real Deal Miami

SEC investigates banks, Congress looks for bailout guidance

September 25, 2008 11:59AM

The federal Securities Exchange Commission is investigating financial institutions involved in the collapse of the $330 billion auction-rate securities market. A federal official said investigations were put on hold during the Wall Street panic, but resumed after the bailout plan was proposed. The Royal Bank of Canada is among the institutions being investigated for allegedly misleading customers into believing financial products were safe and highly liquid investments comparable to cash deposits. President George Bush appeared on television yesterday to defend the $700 billion bailout. His administration hopes that by buying up assets that banks can’t get off their books, the banks will be able to raise more capital and continue making loans. William Gross, co-chief investment office of the bond mutual fund Pacific Investment Management Company, has offered his services for free to the federal Treasury Department to analyze subprime mortgages. Gross’ company manages $830 billion in bond mutual funds, but some investment managers say the government shouldn’t give mortgage securities authority to anyone in the private sector. Meanwhile, Congress has asked presidential candidates Barack Obama and John McCain for guidance on the proposed bailout for financial companies. Stocks fell on Wall Street yesterday for the third day in a row as Federal Reserve Chairman Ben Bernanke warned of “grave threats” facing the economy, and defended the bailout plan. TRD