Auction Rate Securities Penalties

Strange days in New York state: Their AG has reached a deal with three investment banks for malfeasance in the way ARS were sold:

Merrill, Goldman, Deutsche in deal with regulators: : "New York Attorney General Andrew Cuomo said regulators have reached settlements with Merrill Lynch & Co., Goldman Sachs Group Inc. and Deutsche Bank over their roles in selling risky auction-rate securities to investors.

Under the agreement, Cuomo said, Merrill Lynch will buy back roughly $10 billion to $12 billion of the investments from investors by Jan. 2 and pay a fine of $125 million.

Deutsche Bank, which must buy back about $1 billion of auction-rate securities, has been fined $15 million. Goldman Sachs has $22.5 billion of the securities to buy back, and was fined $1.5 billion.

'This has been a great day of progress,' Cuomo said during a conference call.

Cuomo and other regulators previously reached $42 billion worth of settlements with five major Wall Street banks, including Citigroup Inc. and Switzerland's UBS AG. The attorney general threatened earlier Thursday to sue Merrill Lynch if an agreement was not reached by the end of the day."

DB only pays a penalty of $14M (= wrist slap) for selling $1B of securites, but Goldman pays $1.5B for selling $22.5B of ARS? Remind me: Why does Goldman have a good reputation for negotiation?