Mo., Wachovia negotiate over securities issue

Negotiations began Friday and will continue this week, Carnahan said. Auction rate securities had been considered as a safe investment, but the market collapsed in February amid the downturn in the broader credit market.

Carnahan said Missouri is the lead state in the national task force investigating Wachovia's sales practices of auction rate securities. Her office and regulators from others states went to the company's St. Louis headquarters last month, requesting documents and records.

"I am glad that Wachovia is at the table with us," Carnahan said in a statement. "Friday's meeting was productive and we made progress toward an agreement that will ensure investors have access to their money.

"Investors should be able to access their money as promised, and I am committed to finding a solution that will make them whole as quickly as possible."

In a written statement, Wachovia said, "We are meeting with regulators today in Jefferson City and look forward to the discussions."

Wachovia Securities is part of the Charlotte, N.C.-based bank Wachovia Corp.

Auction rate securities were used, among other things, to fund municipal projects and agencies. They were promoted by brokers as liquid investments because customers normally could get out of them quickly.

The interest rates on such securities were reset at regular auctions, but the market fell apart during the credit crisis when investment banks stopped buying because the paper was seen as too risky. The market's failure left many issuers including local governments unable to fund projects or daily operations unless they borrowed at much higher rates. That left investors unable to access their cash.

The state began its investigation in April after dozens of complaints were filed with the Missouri Securities Division, representing more than $40 million of frozen investments.