Meanwhile, AIG has $1.6 trillion in derivatives still on its books that have yet to be "wound down." Are you wondering who will pay those contracts? If so, I suggest you walk to a mirror. That's because the counter parties on those derivatives trades are none other than the biggest Wall Street banks. And they have a choke hold on the U.S. government, which will force taxpayers like you to cough up the cash to pay them.

Krugman points out, as I did a year ago, that deregulation and too much faith in securitization have led us to this juncture. As I said then, I think securitization should be banned, but the U.S. seems determined to revive it. Unfortunately, the arguments being used to get hundreds of billions of taxpayer money are based on fear rather than facts. And it will take more people like Cuomo, who appears willing to force Wall Street to attach some numbers to its claims of catastrophe, to get government to act in America's interest -- rather than Wall Street's.

For all the talk of how how the center of economic power has moved to Washington, the fact remains that the myth of Wall Street invincibility lives on inside the beltway. And this will make it hard to rein in Wall Street enough to return it to its proper support role. To revive the economy, it is not enough merely to cut back on Wall Street's power. We must create something better to replace it. In particular, more needs to be done to encourage technology-based innovation -- which in my humble opinion is the economic engine that should be attracting the most talented minds to drive the U.S. economy forward.

Until that shift occurs, Wall Street will remain the enemy within that sucks the marrow from America's economic bones.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He owns AIG shares and has no financial interest in the other securities mentioned.