Robert says he was a customer of JPMorgan Chase Bank for over a decade and he had various accounts with the bank. Because he needed quick access to his money he preferred to keep his money in the bank and keep it liquid. Robert says that he was told by Chase that when the market dropped they could put his money into something with a higher interest rate."They suggested that my money go into an interest-bearing account," Robert says. "I was not told that it was called an Auction Rate Security, I just knew that I could get my money back in seven days, that it was safe and it was AAA rated. I was also told that it would pay a slightly higher interest rate and I was able to get my money out with a phone call.
"In January 2008, I sold my company. I put the proceeds of the first payment of the sale into my account and told them [the bank] to put it in the high interest account. In May, I was looking at my account online and it was showing no value. There was a lot of money in the account and I was considering buying a house or starting a new company, so I needed that money.
"I called the 1-800 number for the bank but it was the weekend and they couldn't help me. They told me to talk to my representative. The rep said he would call me back in 10 minutes, but he sounded frantic. After two hours he hadn't called me back, so I called and demanded a supervisor.
"The supervisor said that the market melted and that I should have received a letter about this. I had received letters from the bank, but those were about Auction Rate Securities and I didn't know I had them. I just threw the letters out because I didn't think they affected me. The supervisor couldn't tell me when I could get my money.
"I was never told there was any risk—it was supposed to be liquid. I had never heard of Auction Rate Securities. To me, it was a money market and it was not represented as having more risk. I was in at a lower volume until I sold my company, but when I sold the company all the money was put in. That was in January and my understanding is that the market melted in February, but it started to unravel in August 2007. Why wasn't I notified? I put a lot of money in after August 2007 and no one told me not to do this.
"Everything I know about Auction Rate Securities I've learned in the last 60 days. I don't have access to my money. I don't have access to the principle until 2035—a long time for somewhere that I was just supposed to park my money. They told me seven days but now it's 27 years. That's a big difference. They've offered me a loan up to 80% on my own money at low interest rates, but I'd still be paying interest for my own money.
"There are a lot of self-made people who like to dabble with e-trade and you think, 'that's life, you take a risk.' I didn't want to take a risk. My risk was in starting my own company. I hate Wall Street, I hate what Wall Street stands for and I hate taking a risk in Wall Street. If I knew I was investing, I would have done it at Merrill Lynch, but it wasn't presented to me that way. It was presented as a money market with a high interest rate.
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"I have no access to my money and I am trying to figure out how to pay my taxes this year. It's a tremendous amount of money, and I can't start any new businesses because I don't know when I'll have that money. If people can't access their money, that will hurt the economy.
"This whole thing is un-American."
If your money is locked up in Auction Rate Securities, you may be eligible to file a claim against the firm responsible for your investment.