From time to time, there are marked disparities in how events are reported in the Wall Street Journal and the Financial Times. In the overwhelming majority of times, it’s the Journal’s reporting that’s deficient. Today’s sighting fits the classic pattern.
The difference in headlines says it all. The Journal’s is: “German Bank Blames UBS for Subprime Hit.” “Blame” is a loaded word for a headline; the innuendo is “Whining loser looks to find big name scapegoat.” The opening paragraphs stress the guilt-assignment theme:
HSH Nordbank AG said Swiss bank UBS AG sold it $500 million in securities tied to U.S. subprime mortgages that have since soured, in the latest case of a midtier German lender to be singed by the slump in the U.S. mortgage market.
HSH, which specializes in shipping finance, joins a growing number of investors around the world, including municipalities in the U.S. and Australia, that fault the banks that packaged and sold the investments.
Note that the deal in question was a 2002 CDO. That was long before the subprime market got frothy and speculative. Any deal done then would have had years of real estate bull market for its mortgage-holders to refinance. So the fact that a deal of that vintage has come a cropper is, to put it politely, an oddity.
The Financial Times, by contrast, “HSH to sue UBS over subprime losses,” gives a straightforward account:
HSH said Sunday it would file a suit this week to seek repayment of “hundreds of millions” of losses on a portfolio of collateralised debt obligations structured and managed by UBS….
HSH said it aimed to recover losses on North Street 2002-04, a $500m portfolio of collateralised debt obligations linked to the US residential mortgage market. The CDOs were structured, sold and managed by UBS.
The portfolio was bought in 2002 by Landesbank Schleswig-Holstein before it merged with Hamburgische Landesbank to create HSH. HSH said UBS did not act in line with obligations under the contract and changes were made in the portfolio.
“Our investment in the North Street programme should have been managed conservatively,” HSH said in a statement. “We will show that UBS acted wholly against our interests in its management of the investment.”
HSH said UBS did not respond to requests last year to settle out of court.
Given the details presented, it seems crystal clear from the FT’s account that HSH will file suit this week. You’d never learn that from the Journal, which instead said, “HSH, based in Hamburg and Kiel, said in its statement that it was considering legal action.” The Journal also neglected to mention the specific charges about violating the written agreement and changing the portfolio. Since both papers were apparently referring to the same official statement, the disparity is inexplicable.