The Mortgage Bust Goes Global

[flashl]

NORMALLY, St. Jakob’s Hall here is home to soccer tournaments or the occasional hockey game. But on a sunny morning in February, the stadium offered a corporate face-off every bit as contentious as any athletic event. More than 6,000 shareholders of the Swiss banking giant UBS packed the house to vent their fury over tens of billions in losses on American subprime mortgages and what they saw as an insult to traditional Swiss values like prudence and thrift.

...

“The American El Dorado has become a scene from a Western,” declared one middle-aged shareholder, Therese Klemenz. “UBS was the figurehead of Swiss business. As a good housewife, I know you shouldn’t put all your eggs in one basket. A bank is not a casino.”

Thomas Minder, a local shareholder activist, was even more outraged. “What happened here is a scandal,” he thundered. “You’re responsible for the biggest loss in the history of the Swiss economy. Put an end to the Americanization of the Swiss economy!” At that point, Mr. Minder charged the podium, only to be dragged away by security guards.

...UBS — with $3.1 trillion in assets, Switzerland’s biggest bank — made an astonishingly large bet on risky mortgage securities. At one point, that wager amounted to $80 billion, a gambit the bank lost. UBS has already been forced to write down about $37 billion of that financial roll of the dice — more than Citigroup, more than Merrill Lynch, more than any other bank in the world.

...Mr. Ospel said he first became aware of the extent of the threat UBS was facing in early August — three months after its Dillon Read Capital Management hedge fund unit was shuttered after big trading losses. This was six weeks after the implosion of two highly leveraged Bear Stearns hedge funds kicked off the credit crisis for the rest of Wall Street.

NY Times

Did I read that right? The 'American El Dorado' began with Dillon Read in early August 2007.

[Warpy]

1. Yes, the crash happened back in August

something I've posted quite a few times on this board.

August is when banks and brokerages started to look a little more closely at all the exotic "assets" they'd been investing in over the past ten years or so and realizing they were nothing but bum real estate loans in California and Florida that had been laundered through hedge funds into exotic investments.

The exotic investments appealed to people whose jobs depended on how high a percentage of investment return they could generate. Since nobody quite realized what this stuff was, only that it all had astonishingly high rates of return, banks and brokerages across the globe fell for it.

They're letting the bad news out in driblets in the hope they can avert total panic. However, this is worldwide and all banks and brokerages are teetering on the edge of insolvency because of it.