Bank of America defends its handling of bond trouble

Responding to a regulator's public threat of a lawsuit, Bank of America Corp. yesterday issued a statement that it has been negotiating in good faith for nearly a month to buy back all of its customers' auction-rate securities.

"We have repeatedly and consistently said that we are ready and willing to enter into an agreement that follows the same basic terms of previously announced settlements. We understood that we had reached such an agreement in principle nearly two weeks ago," the banking firm said.

A person briefed on the talks said the lack of a resolution appeared to be due to disagreements among the regulators pursuing the case.

On Wednesday, Massachusetts Secretary of State William F. Galvin had expressed frustration that his office had not yet been able to reach a settlement with Bank of America in paying back individuals. He said the Commonwealth might deepen its investigation and file a lawsuit against the bank if the sides didn't come to an agreement shortly.

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

In its statement yesterday, Bank of America said, "We hope that all of the parties will work towards completing a settlement for the benefit of investors who have been affected by unprecedented market disruptions." The bank said it has been negotiating with New York Attorney General Andrew M. Cuomo, Galvin, a coalition of other states, and the Securities and Exchange Commission.

So far, eight major brokerage firms have settled with regulators, pledging to buy back more than $50 billion of auction-rate securities. The investments were bonds issued by nonprofits and municipalities that were sold to investors as cash equivalents. The $330 billion market froze in February, when Wall Street firms suddenly stopped trading the securities, leaving thousands of investors trapped.

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