Andrew Cuomo is at it again. Now facing his unholy wrath: Charles Schwab, in a spot of trouble for selling auction-rate securities to customers without really knowing what was in them and telling customers they were just as good as cash, which I don’t know, is suddenly a crime or something.

Cuomo will agree to turn back into Bruce Banner if Schwab agrees to buy back the securities its customers still hold (and can’t get rid of, the market for these pretty well collapsed in February of last year) like other banks did.  Why can’t you be more like that Merrill Lynch down the street, Charles?  He’s such a nice boy, always remembers to call his mother.

Okay, that’s not entirely true – Citi only agreed to buy back most of the ARSs (arses, ha ha ha) it had sold after a similar threat from…Andrew Cuomo.  Merrill followed suit shortly after Citi’s settlement was announced, and then other banks like JP Morgan Chase and UBS decided they needed to do the same lest they face the dreaded ban hammer.  Charles Schwab apparently doesn’t read the WSJ, because they declined to get right with Jesu Andrew on their own.

An auction-rate security is just what it sounds like: it’s a security whose interest rate is not set in stone at the outset, but reset every so often when new bonds are sold at a dutch auction.  The reset period could be as little as seven days, as many as 35 days, or rarely, semi-annually or annually.  Sure, sounds like a great idea, you can begin receiving interest payments in a week, and most of these were tax-exempt.

What could possibly go wrong?  Well, a growing number of investors could stop bidding on them, which is kind of what happened last year.  Hilariously, the banks that created and maintained the market decided they didn’t want to act as bidders of last resort to…maintain the market, leaving investors holding big piles of nothing, when they thought they were holding big piles of cash equivalents.  Which brings us to the present.