Andrew Cuomo, the New York Attorney General, has renewed his onslaught against America's biggest banks, announcing that he is now pursuing three other financial institutions for compensation from the auction rate securities (ARS) debacle.

Mr Cuomo said that he had contacted Wall Street banks JP Morgan Chase, Morgan Stanley and the American mortgage lender, Wachovia, and insisted that they begin settlement talks with lawyers representing the state of New York.

On Thursday, Citigroup and Merrill Lynch agreed to spend $17.3 billion buying back the so-called auction rate securities from around 70,000 of their clients. On Friday, UBS agreed to pay $22 billion in total, re-acquiring ARS assets from clients and paying fines to regulators.

David Markowitz, Mr Cuomo’s main investor protection lawyer, wrote to JP Morgan, Morgan Stanley and Wachovia, claiming that: "it would be unfair to consumers with accounts at other firms, as well as to the firms that settled, if our investigation were to slow down or stop. Our investigation’s focus is shifting to the next group of market participants.”

Auction rate securities are similar to ordinary bonds except that the interest rate is set periodically at an auction. In the event that no bidders take part in the auction - which are held either every week, month or 35 days - the entire market for the bonds freezes up. Regulators have accused many banks of playing down the risk of such a seizure in the market.

The New York Attorney General office, the Massachusetts Securities Division, the Securities and Exchange Commission (SEC), the state of Texas, and other state regulatory agencies represented by North American Securities Administrators Association, have led the way in forcing the banks to reimburse clients and in some cases, pay fines for misleading investors.

A spokesman for Wachovia said: “We are meeting with regulators [...] and look forward to the discussions. A Morgan Stanley spokesman said: “We have been and continue to cooperate fully with the regulators, and have been working with clients since February to provide liquidity on a case by case basis.” JPMorgan declined to comment.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax