Comments on: UBS Transferring $60 Billion in Dud Assets to Swiss National Bank, Raises $5.3 Billion

By: maynardGKeynes

maynardGKeynes — Thu, 16 Oct 2008 17:04:00 +0000

Something I don’t get. Can anyone explain? If UBS is, indeed, as Yves says, “widely seen as too big for the Swiss government to rescue,” and this is being described as a “rescue”, exactly who is doing the rescuing? It couldn’t be the Fed, because its donation of $54 billion is chump change compared to the Swiss economy. It’s not the Swiss, because everyone says they can’t afford it. And I see that Schwarzenegger is putting his money into California bonds. So who else is left?

By: shtove

shtove — Thu, 16 Oct 2008 15:21:00 +0000

UBS is mopping up a lot of Lehman clients.

By: polit2k

polit2k — Thu, 16 Oct 2008 13:35:00 +0000

It’s a debt-deflationary scenario. Which again will bring out comparison to the Great Depression.

From analysts at JPM this morning (highlights ours):

Our 29 selected Euro. banks are at 3.75% equity/asset ratio based on IFRS account. Reaching an eq./asset ratio of 4.5% would require €5.8tn of asset reductions. In total we estimate potential for reductions of €1.2tn from repos, €2.7tn from trading assets, €0.5tn of loan reductions and the balance of €1.5tn needed to come from other assets. The banks most exposed in our view are DB, UBS and BARC looking at current eq/asset ratio and the b/s maturity profile.

Those are figures against which all the Tarps in the world cannot protect the real economy.

As Citi’s European banking analysts said in a note on Wednesday:
If it feels like we are living through history at the moment, it’s probably because we are.

http://ftalphaville.ft.com/blog/2008/10/16/17114/the-swiss-tarp-and-the-e58-trillion-delever/

And remember BARC has $2.4 trillion CDS positions too. Tim

By: FairEconomist

FairEconomist — Thu, 16 Oct 2008 13:15:00 +0000

It’s a huge, huge, deal – 13% of Swiss GDP. All the same, it’s grossly inadequate for UBS – it only covers US mortgages. I’m sure UBS has lots of other bad loans coming up. In spite of its huge size, it’s really only window dressing. Of course, the current game is all about confidence, so perhaps it will be enough.

By: Anonymous

Anonymous — Thu, 16 Oct 2008 09:57:00 +0000

Long time since I traded FX, but did the FED just take on CHF/USD risk to the tune of some $60 billion?

Funny also how neither the WSJ nor the NYT articles mentions this curious little detail.

By: Doug

Doug — Thu, 16 Oct 2008 09:19:00 +0000

Currency swap because the “assets” are USD based. Wonder if it’s a gunny sac filled with toxic GSE paper.

Hope the Chinese are paying attention to this. If they wanna eat, they better get to the table. However, in that transaction, no need for a Currency swap cause those toxins are for export. The chickens coming home to roost!

By: eh

eh — Thu, 16 Oct 2008 08:02:00 +0000

This transaction allows the SNB and shareholders of UBS to participate in the recovery potential of the entity’s assets once the loan is fully repaid.

That’s pretty funny. How generous of UBS. You’d think that if the ‘recovery potential’ of the assets was all that high, UBS would want to ‘participate’ in that all by themselves.

By: Anonymous

Anonymous — Thu, 16 Oct 2008 07:19:00 +0000

Doesn’t it say the 54B comes from SNB?

By: Anonymous

Anonymous — Thu, 16 Oct 2008 06:41:00 +0000

It says the Swiss are getting the $54B loan from the Fed. Won’t this hit the Fed’s balance sheet?

How the heck does this work?

By: doc holiday

doc holiday — Thu, 16 Oct 2008 06:11:00 +0000

It’s a game of hot potato:

U.S. hedge funds urged the Bank of England to step in and free the $65 billion of Lehman Brothers Holdings Inc. assets frozen in London, the Financial Times reported, citing a letter from Richard Baker, the chief executive officer of the U.S. Managed Funds Association.