It might just be that “free market” forces are going to change the landscape forever.

What if other Fortune 500 companies involved in consumer finance, electronic funds transfer, insurance and foreign exchange decide that this huge credibility gap opens the door for their own entry into the market. McDonald’s once was surveyed as a brand name and 30% of the people surveyed said they would bank with McDonald’s over other established financial insitutions. GE is heavily invovled in global financial services. They might be better able to step in and provide a credible alternative that resinstates global confidence in the finanancial markets far better than the perpetrators of the latest financial  crimes against humanity.

Auction-Rate 
Debt Market 
Faces Probe

Backlash is building against Wall Street for the credit crisis.

The latest case: New York state’s attorney general, Andrew Cuomo, has launched a broad investigation into auction-rate securities, instruments used by municipalities, schools, closed-end mutual funds and others to raise money.

Mr. Cuomo’s office sent subpoenas to 18 institutions on Monday and Tuesday seeking information on their auction-rate-securities, including some of Wall Street’s biggest, such asUBS AG, Citigroup Inc., Merrill Lynch & Co., J.P. Morgan Chase & Co. and Goldman Sachs Group Inc., according to a person familiar with the investigation. The New York attorney general has plans to send out additional subpoenas soon, says the person.

The $330 billion auction-rate market virtually collapsed in February when demand for the securities dried up and Wall Street firms stopped providing the support for the market they’d given in the past.

When that happened, many issuers of the securities were faced with higher interest rates. Buyers of the securities — often wealthy clients of the brokerages and corporations — were left with instruments they thought were liquid but couldn’t sell.

Mr. Cuomo’s office considers the investigation an “industry case,” meaning officials are looking into all aspects of the auction-rate business — from what municipalities or other issuers were told about auction rates as methods of cheap financing all the way down to their distribution, sales and marketing to consumers who believed they were buying a safe and easily sold investment.

Jeff Tuller, a 55-year-old, commercial real-estate broker in New York City, says he can’t access his money. He says he placed $300,000 in auction-rate securities in an account with J.P. Morgan Chase in April 2007 and November last year. He tried to liquidate about $200,000 in February to pay down a mortgage on a house in the Hamptons on Long Island, but says he was told there were no bids for the auctions and his money was stuck.

“I was very upset,” he says.

J.P. Morgan Chase declined to comment.

Auction-rate securities are long-term instruments, but they have interest rates that reset weekly or monthly in a bidding process conducted by securities dealers. During a tumultuous February, investors stopped bidding in the auctions and the securities firms stopped stepping in with their own bids, as they had done in the past. Many bonds in failed auctions reset to higher interest rates. Others, depending on the terms of the bonds, reset to low rates.

State securities regulators are investigating auction-rate securities as well, the North American Securities Administrators Association announced Thursday in a press release. Their efforts will be coordinated through a task force led by Massachusetts Securities Division director Bryan Lantagne. The task force includes members from Florida, Georgia, Illinois, Missouri, New Hampshire, New Jersey, Texas and Washington, according to the release.

Wall Street firms, many of which reported yet another round of write-downs and losses in the first quarter, have attempted to address their often-wealthy clients’ woes. But, they have little capital available to work with, and they’re dealing with investors whose patience is wearing thin.

Several lawsuits seeking class-action status also have been filed thus far.

UBS, Goldman Sachs and Citigroup declined to comment. A Merrill Lynch spokesman said it declines to comment on regulatory matters except to say it is company policy to cooperate with any investigations.

Municipal-bond newspaper Bond Buyer reported on Mr. Cuomo’s investigation Wednesday.

Wall Street is facing backlash on many other fronts, from questions about how firms marketed and structured complex mortgage-backed securities to concerns about the high credit ratings attached to many of these instruments.

Write to Liz Rappaport at liz.rappaport@wsj.com¹