The fact that alltransactions are not made on recorded lines does not mean that there was arecords retentions violation, as the NYAG suggests. We regret the Attorney General feels it is appropriate to try cases in the pressrather than in the courts where all the facts can be presented. To the extent ARS transactions were made on recorded lines, those callshave been located voluntarily and provided to the NYAG. Contrary to the NYAG`sassertion, Schwab has voluntarily produced volumes of data and recordings ofnumerous customer calls. There are no regulations requiring that customer callsbe recorded. Schwab does record some customer calls made or received at callcenters.

Those firms are now reporting record profits while many investors havebeen left in the lurch. Schwab has taken an active role in helping clients who are unable to find buyersfor these securities and has fully cooperated with the New York AttorneyGeneral`s investigation over the past several months. Whenregulators hastily settled with many of these Wall Street firms, they let themoff the hook by not requiring them to repurchase ARS that downstream investorsbought. Schwab brokers, while trained to levels beyond industrystandards, could not be expected to foresee and disclose market risks that evenregulators and market experts did not foresee, or that were intentionally veiledby the underwriters. The seizure of the ARS market has caused hardship for many investors, includingour own clients, and it is puzzling and simply wrong that the NYAG dropped itspursuit of the real culprits who profited immensely from these products and isfocusing its efforts instead on companies and their shareholders who played norole in the creation and promotion of these securities or their downfall.

Schwab had no more idea that the entire market for ARScould fail than did the NYAG, the SEC or FINRA, those very regulators chargedwith overseeing the ARS market and regulating the firms that manufactured themand ran the auctions. The NYAG presumes that Schwab somehow knew of a risk that the entire ARS marketcould seize up at any time, and failed to disclose that risk to its clients,which is preposterous. Schwab did not create the products and had no involvement in the events that ledto the collapse of the ARS market, events brought about by the Wall Streetunderwriters who manufactured, marketed and then simply abandoned theirresponsibility as lead managers for the auctions. They unfairly lay blame onour company for an illiquid market and improper behavior by the large WallStreet firms that created and then, despite their obligations, stoppedsupporting Auction Rate Securities. SAN FRANCISCO–(Business Wire)–Charles Schwab & Co., Inc. issued the following statement today in response toallegations by the Attorney General of New York (NYAG) concerning the company`ssale of Auction Rate Securities (ARS) The Attorney General`s allegations are without merit. In the United States, the 30-year Treasurybond yielded 4.547 percent.