UBS Will Fail Soon

[ByLoSellHi]

Quote from Illum:

Completely agree. Nice call

Why, thank you.

UBS has a short time frame to reinvent itself and justify its purpose.

In this environment, especially, that is a very tall order.

They used to be the shelter house to the uber wealthy, and those clients trusted that all would be held completely confidential. This gave them massive amounts of deposits.

They just ratted on tens of thousands of clients and will be under additional pressure going forward, and all bonds of anything resembling a relationship built upon a shadow of trust has been shattered.

It is no more.

 

[Traden4Alpha]

Quote from ASusilovic:
"Effectively subprime" ? I am not aware of European banks practicing lending policies like in U.S. Taking into consideration currency movements in the last week one might observe challenging times for borrowers, but I do not think these borrowers are to be named "subprime".

European bank practices were analogous to US subprime ARMs in that European banks lent money to Eastern European countries that could not sustain repayment of that debt unless their economies kept growing and they kept rerolling the debt (analogous to lending to low-income home buyers that could only afford their homes through a perpetual cycle of refis and flips). These loans were also effective ARMs (adjustable rate mortgages) because they were denominated in Euros, CHF, etc., not local currency. When the recession started and growth stopped, the exchange rates changed and the monthly payment increased. For example Polish borrowers (60% of whom pay mortgages in CHF) have seen their monthly payments double.

That's why I say they were effectively subprime ARMs -- variable payment loans made to second-tier credit risks on the assumption that the borrower's assets would enable them to grow their way out of debt.

 

[Traden4Alpha]

Well, the situation looks much worse than I thought because not only have the monthly payments doubled for many Eastern European borrowers, but the amount of principal owed has effectively doubled, too. Thus, a very large fraction of Eastern European mortgages were pushed underwater by fx rate changes. These borrowers can't even fix their problems with a refi or sale of the home because they owe much more than the asset is worth.

(see http://www.nytimes.com/2009/02/20/business/economy/20norris.html )

Moreover, if the U.S. is facing ugly political wrangling over who pays for the bailout and who benefits from the bailout, the European situation is worse due to cross-border issues. Will the Austrian or Swiss govt really bailout Polish and Hungarian borrowers? WOuld (can ) the Polish and Hungarian govts pay-off these loans?

Situations like these make it clear that attempts to transfer risk (e.g. interest rate risks or exchange rate risks) from the lender to the borrower have the potential to bite the lender.

 

[Illum]

You seein this about the color coding and symbolic words for what currency account is in? They have criminal conspiracy on UBS. Rico.

Also the 8 or so billionaires who tried in Swiss court to stop UBS from releasing their info stating "It would do them irreparable harm" Swiss courts agreed but UBS said "too late, we already handed them over" All deposits will be withdrawn, I'm no billionaire but I wouldn't be playing games with this nonsense. It's over, bank run.

MIAMI (Reuters) - UBS AG (VTX:UBSN.VX - News; NYSE:UBS - News) warned Friday that it could go out of business if it complied with an order to reveal the names of thousands of suspected U.S. tax dodgers with secret offshore accounts at the Swiss bank.

 

[Illum]

Ran across this Jim rogers video. I don't like the title "Jim Rodgers starts UBS bank run" That is garbage, but he is a wealthy man and he took his money out fast.

http://www.youtube.com/watch?v=yjsZbkD7TSA&feature=related

 

[ASusilovic]

Quote from Traden4Alpha:

European bank practices were analogous to US subprime ARMs in that European banks lent money to Eastern European countries that could not sustain repayment of that debt unless their economies kept growing and they kept rerolling the debt (analogous to lending to low-income home buyers that could only afford their homes through a perpetual cycle of refis and flips). These loans were also effective ARMs (adjustable rate mortgages) because they were denominated in Euros, CHF, etc., not local currency. When the recession started and growth stopped, the exchange rates changed and the monthly payment increased. For example Polish borrowers (60% of whom pay mortgages in CHF) have seen their monthly payments double.

That's why I say they were effectively subprime ARMs -- variable payment loans made to second-tier credit risks on the assumption that the borrower's assets would enable them to grow their way out of debt.

Rerolling and refis only chance for these countries and borrowers. I thing Germany is finally aware of the situation and announced on Friday to capitalize IMF with more funds. France is favoring EU bailout :

http://www.marketwatch.com/news/sto...E77A8-038E-4C2D-A2C4-E67352157717}&dist=msr_4

http://www.marketwatch.com/news/sto...1B2FC-3880-40BA-AFE4-03277DC96A4F}&dist=msr_2

 

[Manni]

In Poland, 60% of all mortgages are in Swiss francs.

The problems in the East European banking system will start the next wave of the credit crisis.

Austria has lent €230 billion there, equivalent to 70% of Austria’s GDP. Austria’s largest bank, Bank Austria, which in turn is owned by Italy’s Unicredito along with the German HypoVereinsbank, faces what the Vienna press calls a ‘monetary Stalingrad’ over its loan exposure in the east.

Eastern Europe has borrowed a total of more than $1.7 TRILLION abroad from mainly west European banks. Much of that has been short-term borrowing of less than a year. In 2009 eastern countries must repay or roll-over (renew) some $400 billion, fully 33% of the region’s total GDP.

http://www.globalresearch.ca/index.php?context=va&aid=12339

 

[dont]

If UBS goes kiss the world goodbye if you thought things were bad with Lehman you don't want to see the shit that a UBS failure will bring.

 

[flytiger]

Quote from dont:

If UBS goes kiss the world goodbye if you thought things were bad with Lehman you don't want to see the shit that a UBS failure will bring.

It'll go. They're too arrogant, will step over the line, DOJ will indict them. Let the Swiss eat it. Roll it into CS and Julius Baer.

This is just part of the problem that UBS brought to these shores. Just a piece.

 

[Traden4Alpha]

Quote from dont:

If UBS goes kiss the world goodbye if you thought things were bad with Lehman you don't want to see the shit that a UBS failure will bring.

Exactly! UBS is 3X the size of Lehman. Moreover, I'd suspect that UBS has a much higher fraction of non-risk capital from depositors and bond-holders.