This week, state investigators from Massachusetts and New York revealed more pieces of the scam that was the $330 billion ARS market. Up until this week, it had been known that UBS AG (NYSE: UBS) had told its brokers to dump this toxic waste on its so-called private clients -- individual investors -- to keep UBS from needing to write it off from its own books.

But this week we learned that banks had been colluding for as long as two years to prop up the weekly auctions that were supposed to set the rates on these securities. It looked like there was good evidence that the banks were committing securities fraud when they sold ARS on the premise that they were cash-like and offered slightly higher yields than money market funds. Why the fraud? Because, their internal e-mails and behavior revealed that they were desperate to get rid of the toxic waste.

Moreover, those e-mails show that the banks' claim that the auctions suddenly failed in February 2008 is another fraud. As I posted, Merrill Lynch & Co. (NYSE: MER) e-mails reveal that the auctions started failing in January 2006. And it was public knowledge, according to Financial Week, that ARS auctions were failing last September -- 60 such auctions failed to the tune of $6 billion.