Bank of America talks are stalled, Galvin says

Talks with Bank of America Corp. on paying back all of its customers who bought auction-rate securities have stalled, Massachusetts Secretary of State William F. Galvin said yesterday.

If the banking giant doesn't agree to repay individual customers and businesses soon, the Massachusetts Securities Division may pursue a lawsuit against the company, he said.

Last week, the banking behemoth, as part of its negotiations with regulators, agreed to buy back auction-rate securities from government entities, including $43 million from the Massachusetts Turnpike Authority and the Massachusetts Housing Partnership.

Galvin said Massachusetts regulators have been negotiating with Bank of America for two weeks without a resolution. The bank is talking to other state regulators as well. Galvin said the delays are leaving investors trapped with no answers: "We want to resolve this for them."

Bank of America had no immediate comment yesterday. The company has said it is cooperating with regulators.

The Globe previously reported that Bank of America was warning some large clients about the looming problems in the auction-rate market last December while continuing to sell the securities without such warnings to smaller investors into February.

Auction-rate securities are the bonds of nonprofits and municipalities that were widely sold on Wall Street as safe and cash-like. But all trading in the securities ceased in February, amid other problems in the credit markets, leaving thousands of investors unable to access their money.

State and federal regulators have so far secured more than $50 billion in settlements with brokerage firms that sold auction-rate securities and then stopped trading them. UBS Financial Services Inc. agreed to the largest buyback, at nearly $19 billion, in a deal led by Galvin's office and New York Attorney General Andrew M. Cuomo. Merrill Lynch & Co. agreed to buy back $10 billion of the investments to settle fraud charges brought by Galvin.

Together, eight major firms also have agreed to pay more than $500 million in fines.

Also yesterday, Reuters reported that the office of New York attorney general Andrew Cuomo is issuing subpoenas to several Bank of America executives as the state broadens its probe into the marketing of auction-rate securities. According to a person familiar with the investigation, Cuomo's office wanted to speak with "several" bank officials to learn more about Bank of America's handling of auction rates.

Beth Healy can be reached at bhealy@globe.com.