Wachovia Settles Auction-Rate Probe

Last week, Citigroup(C Quote) and UBS(UBS Quote) reached settlements in which they agreed to purchase some $26 billion worth of the securities.

Within the past eight days, Cuomo's office has signed agreements restoring nearly $35 billion of liquidity to thousands of investors nationwide, it said in a release. Merrill Lynch(MER Quote) also voluntarily agreed last week to buy back some $12 billion worth of auction rate securities.

Merrill Lynch said in an emailed statement that it was "surprised" that Cuomo sent a letter "threatening legal action" if the firm didn't settle its differences, much like his letters to JPMorgan Chase, Morgan Stanley and Wachovia earlier this week.

"We have been discussing this issue with New York and other regulators since we announced last week our plan to purchase our retail clients' ARS and we thought we were making progress," Merrill Lynch said. "We anticipated further talks."

Charles Schwab(SCHW Quote) and Fidelity are two other brokerage firms reportedly being probed by the New York AG's office, according to Reuters and CNBC.

After the closing bell, >Commerce Bank(CBSH Quote) said it would between Aug. 25 and Sept. 30 voluntarily buy back $545 million in auction-rate securities it sold to customers.

"At the heart of this investigation is the simple goal of returning billions of dollars back into the hands of investors, which in turn injects confidence into the entire market," Cuomo said in a statement. "The industry is now taking responsibility for correcting a problem they helped create, and we'll continue working to make all investors whole."

"We understand that unprecedented market conditions have created difficulties for our clients, particularly those holding auction rate securities," Wachovia CEO Robert Steel said in a statement. "We are pleased to announce a comprehensive solution for the liquidity needs of clients who purchased auction rate securities at Wachovia and to resolve this matter with federal and state regulators."