Interesting weekend and follow up.
2008 UBS needed govt money to survive. That the govt “pushed” them to acquire CS was already in “the cards”. What is interesting is the apparent mark to market of the so called coco bonds that the Swiss National Bank dismissed as “worthless”. That this so called “new financial invention for capital reserves or convertibility” is now apparently finally defined clearly by the regulator. Perhaps we should instead look at other global financial institutions that used this instrument to bolster their capital ratios; now that we know their “real” market value.
Another full circle comment would be to see the mismatch of “traditional deposit taking institutions” getting burned by the bright lights of “American Investment Banking”. UBS bought Dillon Read, Warburg, merged with SBC etc. CS bought First Boston, DB handed over the reigns to Americans from Merrill Lynch Equity Capital group who then took unbelievable multiples of leverage….Then you have GS that can’t make only in traditional banking (deposits). The best quote from Bonfire of the Vanities, to paraphrase Tom Wolfe, “Wall Street starts at a church and ends in a graveyard”…
Missing in all the discussion is the obscene amount of leverage these banks are taking. This continues to be at the root of the problem.$Credit Suisse Group AG(CS)$
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