UPDATE 1-Michigan contacts Comerica in auction-rate probe

(Adds details, background, Comerica spokesman)

CHICAGO, Aug 26 (Reuters) - The Michigan attorney general's office sent a letter to Comerica Inc in the state's probe of the auction-rate securities market, a spokesman for the office said on Tuesday.

Rusty Hills, the spokesman, said the letter to the president of Comerica Securities was sent on Tuesday.

He added that the state would like to see a settlement with Comerica similar to those reached by other states, most notably New York, where Attorney General Andrew Cuomo has announced deals with several Wall Street firms.

Under those settlements, firms including Merrill Lynch & Co. MER.N, Goldman Sachs Group Inc. (GS.N), Citigroup (C.N) and Morgan Stanley (MS.N) have agreed to pay fines and buy back billions of dollars of the debt to settle charges they misled investors about risk.

A spokesman for Dallas-based Comerica declined to comment on the letter.

On Tuesday, Michigan Attorney General Mike Cox urged Michigan investors in auction rates to contact state regulators if they believe their investment was misrepresented.

The $330 billion auction-rate market froze up early this year when brokers abandoned their traditional role as buyers of last resort. As a result, investors were unable to cash out of the market that had been touted as being liquid. Meanwhile, issuers of auction-rate debt, which included states, nonprofit hospitals and student loan agencies, faced much higher interest rates as auctions failed.

Many issuers have since exited the market through debt restructurings. (Reporting by Karen Pierog; Editing by Leslie Adler)