Charles Schwab ( SCHW) is claiming to be the victim in the collapse of the market for auction-rate securities, the now-maligned variable-rate debt instruments that were once considered as safe as cash.

Victimhood is basically Schwab's defense against charges by New York Attorney General Andrew Cuomo that the brokerage over hyped the ARS products to its clients and failed to warn them about the pending collapse of the market that would make the securities nearly impossible to unload.

Brokerages like Schwab like to point out that they are just the middlemen, connecting buyers to sellers. From Schwab's perspective, it neither created the ARS market nor contributed to its collapse.

Can any single company be blamed for the collapse of the ARS market, invented by Lehman Brothers, enhanced by Goldman Sachs ( GS) and eventually joined by Citigroup ( C), JPMorgan Chase ( JPM), Morgan Stanley ( MS) and others? Can you blame the sales person when the product is faulty? I guess it depends on the sales pitch, which is what this case is about.

Cuomo is claiming that Schwab brokers didn't understand what they were selling. I don't know exactly what Schwab clients were told or whether the phrase "safe as cash" was ever uttered by a Schwab broker. Even if they did say such things, they weren't alone. That was industry parlance back in the day.

Auction-rate securities are typically derived from corporate and municipal debt, so it's easy to understand why they were considered safe bets. They are also expensive to buy, often denominated at a minimum of $25,000 and sold to institutional investors and the wealthy.

You'd hope that anyone throwing that kind of money around would do a little of their own due diligence.

Schwab is playing it smart and isn't building its defense by pointing the finger at its clients, who should have known better themselves (that's my opinion, Schwab can't afford to say it).

But the New York Attorney General doesn't seem to believe in caveat emptor. Nor does he believe that the extraordinary circumstances in the financial markets since 2008 -- which befuddled regulators as much as anyone -- provide a legitimate defense.

Cuomo thinks Schwab needs to essentially issue refunds and buy back all the auction-rate securities it sold.

No doubt Schwab is in the cross hairs because it is the largest U.S. online brokerage. New York attorneys general have a long and storied history of making an example of companies like Schwab. It's a political right of passage.

It will be interesting to see whether Schwab caves in and agrees to a settlement or whether the brokerage decides to defend its honor and try to prove Cuomo wrong.

Whether anyone wants to say it or not, this case boils down to how much individual responsibility an investor should bear for the choices they make with their money.

Glenn Hall is the editor of TheStreet.com. Previously, he served as deputy editor and chief innovation officer at The Orange County Register and as a news manager at Bloomberg News in Frankfurt, Amsterdam and Washington, D.C. As a reporter, he covered business and financial markets, worked in both print and television in the U.S. and Europe, and conducted in-depth investigative coverage at The Journal-Gazette in Fort Wayne, Ind. His work also has been published in a variety of newspapers including The Wall Street Journal, The New York Times and International Herald Tribune. Hall received a bachelor's degree in journalism and political science from The Ohio State University and a certificate in project and program management from Boston University.

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