There has been a great deal of talk about how the New York State Attorney General and the SEC has done companies and individual investors a service by getting Merrill Lynch (MER), Citigroup (C) and UBS (UBS) to buy-back nearly $40 billion in auction-rate securities. They were marketed as "cash equivalents" with good yields, but when banks decided it was too risky to make a market in the securities, they could not be sold.

In most cases, large businesses will have to wait several months for their auction-rates to be bought back. Individual investors will get relief very quickly. In many cases, people holding the paper cannot put children through college or cover the costs of balloon mortgages.

The position of small and mid-sized businesses is a bit more murky. Citigroup has said it will buy auction-rates from smaller corporations sometime over the next three months. The policies of UBS and Merrill are a bit less clear.

Perhaps the biggest pain for small business from the auction-rate problem is that other large banks like Wachovia (WB) and Morgan Stanley (MS) have not settled charges that they used misleading marketing to sell the bonds. In these cases, access to the capital is still a problem.

The money tied up in auction-rates has hurt capital spending for many companies. In other cases, firms that have needed to offset losses with cash from their balance sheets have been unable to do so.

Small businesses with auction-rate securities need to stake a claims to their capital while the government’s involvement is still fresh. By the end of the year, the regulatory spotlight may have moved somewhere else.

Douglas A. McIntyre

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