Ever since the auction-rate securities mess erupted six months ago, the same story has echoed across Wall Street. The way UBS and other banks tell it, the $330 billion market functioned for years without a hitch, providing big corporations and wealthy investors with a highly liquid alternative to cash. Then, without warning, it imploded in February, leaving tens of thousands of investors with huge losses if they tapped their accounts—assuming they could get the money at all.

But a BusinessWeek analysis, based on court documents and interviews with regulators, investors, and financial advisers, reveals that there were serious flaws in the market long before it seized up. Last summer's credit crunch, which scared off investors from all manner of debt, only exacerbated the problems. There could be legal consequences for UBS, which is being sued for fraud by regulators in Massachusetts and New York. UBS, one of the biggest underwriters of the securities, says the cases are without merit and that e-mails cited in the suits are taken out of context. (On July 30, UBS settled a separate investigation by the Massachusetts Attorney General into sales of the securities to the state's municipalities.)

During the first half of 2008 securities class action filings continued the rebound that started in the second half of 2007, following two years of lower activity. According to a report released today by Cornerstone Research in cooperation with Stanford Law Schools Securities Class Action Clearinghouse, there were 110 filings between January 1 and June 30, 2008, suggesting as many as 220 filings by the end of the year.

The recent high level of filings coincided with a marked increase in stock market volatility. Filings jumped from 119 in the twelve months ending June 2007 to 217 over the next twelve months, and stock market volatility doubled over the same period. This level of litigation activity exceeded the annual average for the eleven years between January 1997 and December 2007. About half of the filings in the first half of 2008 were driven by the subprime mortgage/credit crunch, with 58 filings containing related allegations. Of these, 17 involved auction rate securities.

Read the report from Cornertone Research and Stanford Law Schools Securities Class Action Clearinghouse here.

Congress approved mortgage relief for 400,000 struggling homeowners Saturday as part of an election-year housing plan that also aims to calm jittery financial markets and bolster the sagging economy. President Bush said he would sign it promptly, despite reservations.

The measure, regarded as the most significant housing legislation in decades, lets homeowners who cannot afford their payments refinance into more affordable government-backed loans rather than losing their homes.

Read the full article here on the MSNBC Business website.

Four Spitzer administration officials violated the state’s ethics law when they used the State Police last summer to gather travel documents they hoped would tarnish Joseph L. Bruno, then the State Senate majority leader, according to a report released on Thursday by the State Commission on Public Integrity.

The report drew on 3,000 pages of testimony and thousands of internal documents, and depicts an administration on a war footing, with Gov. Eliot Spitzer seething over attacks from Mr. Bruno and eager to strike back.

It also describes an extensive — but ultimately fruitless — effort by the governor’s top aides to deny the commission e-mail messages and documents that could shed light on the administration’s actions last spring and summer, when internal discussions began about whether Mr. Bruno’s travels on state aircraft could pose a political problem for the senator.

Investors launched a multibillion dollar class action lawsuit Wednesday against the Canadian Imperial Bank of Commerce, alleging it downplayed its exposure to the US subprime mortgage meltdown.

Investors who purchased CIBC shares between May 31, 2007 and February 28, 2008 launched the suit against the bank and several of its directors, alleging they "misrepresented the magnitude and level of risk associated with its US subprime residential mortgage investments."

CIBC is purported to have said its total exposure to the failing US subprime residential mortgages market was "not a major issue" when, in fact, the bank had exposure to billions of dollars of losses.

Read the full story here on the Yahoo! News website.

New York state Attorney General Andrew Cuomo is making preparations to file civil securities-fraud charges against UBS AG, possibly as early as this week -- the first of several cases that could grow out of New York's investigations into the auction-rate-securities market and another blow for the industry and UBS.

State securities regulators in Massachusettes have already filed charges against UBS. Cuomo’s office could file charges against other entities it is investigating in coming weeks, say people familiar with the investigation.

Read the full story here on the Financial News Online website.

Congress may outlaw elements of oil futures trading that lawmakers found distorted demand and contributed to the 69 percent surge in prices in the past year.

U.S. legislators are considering limits on the number of oil contracts an investor can hold and may increase disclosure requirements. Speculators such as Goldman Sachs Group Inc. use the practices to bet on price swings, which may drive up prices, though they have no intention of taking delivery of underlying goods, lawmakers say.

Wachovia Corp. lost $8.86 billion in the second quarter, and said Tuesday it was slashing its dividend and cutting 6,350 jobs after losses tied to mortgages soared.

Even excluding one-time items, the results substantially missed Wall Street estimates, and shares sank to mid-1991 levels.

“These bottom-line results are disappointing and unacceptable,” Chairman Lanty Smith said in a statement. “While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility.”

Bank examiners from the U.S. Federal Reserve and the Comptroller of the Currency are inspecting the books of mortgage finance companies, Fannie Mae and Freddie Mac, The New York Times reported on Tuesday.

The Fed and the comptroller's office began combing the books of the two largest U.S. home loan companies after their declining stock prices caused widespread anxiety in the market, the paper said, quoting Treasury Secretary Henry Paulson.

Bank of America became the latest bank to report better-than-expected earnings, even as it revealed Monday that its profits plunged 41% during the most recent quarter.

The Charlotte, N.C.-based company reported net income of $3.41 billion, or 72 cents a share, during the second quarter. That was down 41% from $5.76 billion, or $1.28, a year earlier.

Revenue rose to $20.32 billion, up from $17.73 billion a year earlier, driven by wider net interest margins, loan growth and higher income from mortgage banking and the company's investment and brokerage services.

Both figures were much better than had been expected. Analysts surveyed by Thomson Reuters were expecting the company to report a profit of $2.66 billion, or 53 cents a share, on revenue of $18.37 billion.

Read the full story here on the CNN Money website.

In the first case of its type that I have seen, a city employee in San Francisco has actually locked up access to a full network and refused to give anyone else access. Here is the story from Yahoo! Tech:

A network administrator has locked up a multimillion dollar computer system for San Francisco that handles sensitive data and is refusing to give police the password, the San Francisco Chronicle reported Monday.

The employee, 43-year-old Terry Childs, was arrested Sunday. He gave some passwords to police, which did not work, and refused to reveal the real code, the paper reported.

The new FiberWAN (Wide Area Network) handles city payroll files, jail bookings, law enforcement documents and official e-mail for San Francisco. The network is functioning but administrators have little or no access.

Childs, who remains in custody, is accused of improperly tampering with computer systems and causing a denial of service, said Kamala Harris, San Francisco's district attorney, on Monday afternoon.

"The bail has been set at $5 million, and the exposure in this case if he were convicted on all counts would be seven years in prison," Harris said.

Harris said it's unknown why Childs tampered with the system. The Chronicle, however, reported that Childs was disciplined recently for poor performance. Childs worked in the Department of Technology for San Francisco, making close to US$150,000 a year, the paper reported.

City officials told the paper that Childs may have caused millions in damage while also rigging the network so that other third parties could monitor traffic, posing a huge data security risk. He is also alleged to have installed a tracing system to monitor communications related to his personnel case.