Having gone to great, and expensive, lengths to bail investors out of auction-rate securities, which have been severely hit by the credit crunch, some closed-end funds regret this decision in light of UBS’, Citigroup’s and Merrill Lynch’s plan to buy back $40 billion in auction-rate preferreds, The Wall Street Journal reports.

When the $330 billion auction-rate securities market crashed in February, closed-end funds, with $65 billion in auction-rate securities, were hit badly.

Some firms, like BlackRock, jumped to redeem auction-rates when investors got restless following the crisis, while others, such as Allianz SE’s Pimco, decided to wait.

Throughout July, closed-end funds redeemed or planned to redeem up to $24 billion in auction-rate securities. BlackRock, Nuveen and Eaton Vance account for $12 billion of these redemptions.

Some funds financed the redemptions with syndicated bank loans and expensive lines of credit.Others deleveraged, or reduced their debt, thus compromising their returns.

Pimco’s reason for avoiding redemptions is that it would have been more expensive than paying penalty interest rates on auction-rate securities.

Wall Street banks’ reason to buy back the securities is that they’re under pressure from regulators to correct things with investors, whom they told auction rates had higher yields than cash equivalents.