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Paul Kiesel
Paul Kiesel
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UBS Admits "Subprime Miscues"

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UBS released a report on its Web site Monday conceding that a “blind drive for revenue” led it to take more risks than it should have. UBS has written off more debt from the subprime mortgage crisis than any other bank, and they appear to be one of the first lenders to publicly take some accountability for their role in it.

 

However, the report doesn’t discuss why it chose to be so aggressive in the subprime mortgage market. Other than the fact that the bank “focused too much on the maximization of revenue growth,” it doesn’t explicitly state why and/or how the acquisitions and selling of mortgage-backed securities was going to help the bank long-term. Eventually, these questions will need to be answered, as the aggressive push by banks like UBS to secure Option ARM loans, has, in effect, hurt other sectors of the credit industry (student loan lenders, credit car companies, small business loans, etc.) and now people who weren’t even tied into any type of mortgage are now at a major disadvantage in trying to secure a decent loan (interest rate or even approval) because of shady transactions in the subprime market.  

 

UBS is Switzerland’s largest bank and it has written off about 38 billion Swiss francs (about $37.3 billion) since the subprime crisis began last summer. According to The New York Times, the bank has destroyed all the profits generated since 2004.