It's interesting that about 15 minutes ago, Rush Limbaugh was roaring about Obama attacking UBS. Ohnoez! The same president who must be crucified for the tax evasion of others apparently can't go after widespread, systematic tax evasion by Wall Street in a deferred prosecution:
UBS has agreed to pay $780m (£548m) in fines and turn over some customer names to the US government as part of a landmark settlement in which the Swiss bank admitted it helped thousands of clients evade taxes.
Update: Changed title. Since this is really a Dept Of Justice matter, I should credit Eric Holder & DOJ as well.
Not surprisingly, Jim Cramer (of Mad Money) recommended UBS stock as a buy at the end of 2007. To me it was more of a "oh, hell no". And as with many of his picks, should you have followed Cramer you'd find yourself in a hole, particularly when the market caught UBS leadership wearing no clothes, having lost tens of billions through mismanagement and internal theft, and had them replaced. But there are lots of bad banks... why should DOJ go after one based in Geneva or Zurich?
The idea that this is a "Swiss bank" is sort of misleading. While subject to Swiss banking laws, it's one of the larger investment banks based on the other side of the pond, operates multinationally in NYC and New Jersey, is involved in our American subprime crisis, and often serves as a hole for some rather shady Americans due to Swiss banking's most secretive nature. Speaking of shady Americans, guess who's one of their recentexecutives? John McCain-advising, Glass Steagall-repealing Phill Gramm, who did a lot better at managing UBS than the US economy, which he charged off a cliff whilst Senator. But as for Gramm's coworkers upholding UBS' profitability? Eh, not so much. A Slate article on UBS (and Gramm) from July 7, 2008:
UBS's investment banking unit made disastrous forays into subprime lending. Last December , having already announced a third-quarter loss, UBS raised about $13 billion to replenish its balance sheets, mostly from the Government of Singapore Investment Corp. In the fourth quarter of 2007 and the first quarter of 2008, it racked up Mont Blanc-sized losses on subprime debt of nearly $32 billion. In May, it sold about $15 billion worth of mortgage-related assets to the investment firm BlackRock—but only after it agreed to finance most of the purchase price. In June, UBS raised another $15.5 billion in a rights offering. The credit losses—some $38 billion so far, according to UBS—caused the bank to replace its chairman and install new leadership at its investment bank.
UBS was hardly alone in getting caught up in the global credit bubble—although its losses are truly impressive. But UBS has suffered further reputation damage. Late last month, the state of Massachusetts charged UBS with screwing over well-heeled customers who had purchased auction-rate securities. The mechanics of auction-rate securities—instruments that pay a slightly higher rate of interest than municipal bonds or cash deposits and were thought by many purchasers and brokers to be as safe as cash—are complicated. But the issue is relatively simple and familiar to anyone who has combed through the Spitzer Wall Street research settlement of 2003. UBS stands accused of selling retail brokerage customers products that turned out to be profitable for the bank's investment banking unit but caused the customers to suffer significant losses. (Read some of the internal e-mails here.)
These charges, levied by a state regulator, are already causing reputation damage to UBS. (Dow Jones reported today that retail brokers are fleeing.) UBS's asset management business is likely to suffer further from an ongoing federal investigation, in which Bradley Birkenfeld, an American UBS private banker who was busted on tax evasion charges, has plead guilty and is cooperating. Among the revelations so far: Birkenfeld helped a client bring in diamonds from abroad by stashing them in a tube of toothpaste.
To the average schmo, UBS may not look like a particularly interesting string of letters, but it's one of the premier greedy con-operations on the planet. UBS is not your run-of-the-mill Swiss bank, whose freedom from scrutiny just provides opportunity for everydaymoney laundering, but has its hands in all the major problems with the world economy, is a safe harbor for tax traitors and pocketed both its shareholders' money and that of its customers.
But what's hilarious is that Rush, soon to be followed by FOX News and all the rest will decry Obama's anti-banking move, yet UBS brought in the new year already ending and disclosing the secretive relationships with its American customers. As as for that 780 million, please-don't-hurt-me payment, 380 mil is in forfeited profits while 400 million is for lost tax revenue. By the way, did I mention Rush came into his UBS segment by screaming about how New York was planning to tax away the rich people? Now they're going to be taxed fairly and actually have to pay it. The horror!