As the financial crisis wears on, we’re seeing more and more evidence that the problems are far larger and more widespread than people want to admit. These April Fools have of course only been fooling themselves. Of course there were going to be more write-offs, more losses, more companies coming perilously close to the edge, more job cuts, more problems across the board. You were, well, a fool not to believe that.
Swiss banking giant UBS has announced an $11.8 billion dollar loss and $19 billion in more subprime write-offs.
UBS AG, battered by the biggest writedowns from the collapse of the U.S. subprime mortgage market, reported a 12 billion-franc ($11.9 billion) first-quarter loss and said Chairman Marcel Ospel will step down.
The bank will seek 15 billion francs in a rights offer to replenish capital, on top of 13 billion francs already raised from investors in Singapore and the Middle East. UBS will write down $19 billion on debt securities, bringing the total to almost $38 billion since the third quarter of 2007. Zurich-based UBS also said today it will cut jobs at the investment bank.
Ospel, 58, who helped form the world’s largest money manager a decade ago, will be replaced by general counsel Peter Kurer. Deutsche Bank AG reported $3.9 billion of writedowns and said today that markets are “significantly more challenging.” UBS rose as much as 10 percent in Swiss trading on optimism the country’s biggest bank will recover from its subprime losses.
That’s some optimism. A bank has lost $38 billion dollars in the last six months, the Chairman of the Board is stepping down and the stock goes up? That’s not normal behavior, that’s wishful thinking in action. Seems pretty foolish to me. Deutsche Bank’s nearly $4 billion write-off there seems much better by comparison, doesn’t it?
Meanwhile here in the states, news is that you were fooling yourself if you believed Hammerin’ Hank Paulson’s “major overhaul” of the financial regulation system was an actual fix, or that it will pass muster. Both the Democrats and the financial industry hate it, so of course nothing will get done…Paulson himself says the plan will take years to implement.
Hank Paulson, US Treasury secretary, conceded on Monday it could take “many years” to overhaul US financial regulation as congressional critics took aim at his new plan to revamp a system dating back to the Great Depression.
The Bush administration issued its blueprint for regulatory reform following criticism that the fragmented system of US financial oversight contributed to the meltdown in the US subprime mortgage business and the resulting global market turmoil.
But the plan – which envisions expanding the reach of the Federal Reserve to prevent future crises while reducing the role of some other regulators – would “require a great deal of discussion and many years to complete”, Mr Paulson said.
He added that the administration’s recommendations “should not and will not be implemented until after the present market difficulties are past”.
Many of the proposals outlined on Monday would require legislation. In a sign of the difficulties the Bush administration may face in Congress, Chris Dodd, Democratic chairman of the Senate Banking Committee, said the Treasury plan had “serious flaws”.
He said it “fails to realise that the Fed helped create this crisis by ignoring the red flags as far back as five years ago. It does not make sense to give a bigger shovel to the very people who helped dig us into this hole”.
The Treasury has been working on the proposal since March 2007 to bolster US capital markets amid intensifying overseas competition. Originally, its deliberations focused on whether lighter regulation could increase US competitiveness. However, the credit crisis exposed important gaps in the ability of US regulators to supervise financial activity.
If there were still any lingering optimists out there, the fact this plan’s been cooking since March 2007 — long before the subprime crisis reared its ugly head — is a dead giveaway it’s another Bush plan to weaken as much oversight and enforcement of that oversight as possible. Make no mistake, that’s Hank Paulson’s big legacy…even more financial deregulation. Once a Bush crony, always a Bush crony.
But it’s a bit foolish to assume that was Bush’s only card to play this election year with the GOP’s prospects so frightfully dim. News is that Bush will indeed propose Federal dollars for homeowner refinancing.
The Bush administration is finalizing a plan to rescue thousands of homeowners facing foreclosure by helping them refinance into more affordable loans, the Washington Post reported in its Saturday edition.
The proposal is aimed at assisting borrowers who owe their banks more than their homes are worth due to declining home prices, the Post reported, citing unnamed government officials.
If enacted, it would mark the first time the White House has committed federal dollars to help the most hard-pressed borrowers.
Under the plan, the Federal Housing Administration would encourage lenders to forgive a portion of these loans and issue new, smaller loans in exchange for the backing of the U.S. government, the Post said.
But of course you were fooling yourself if you thought the Bush plan would be anything else other than a bailout of Wall Street in disguise. You forgive these bad loans, we pay you for it with government cash. Same old Bush.
These are the responses of our government leaders right now, nine more months of silly, almost worthless plans that make no effort at solving any of the actual problems, but sure will give the financial industry a warm fuzzy feeling. Those are the GOP constituents, not the taxpayer or the common man.
Don’t be fooled. The worst is yet to come.
Be prepared.