Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Writedown Parade Marches On


Banks lose billions, seek capital to remain solvent.

First quarter earnings are just around the corner and investors are hoping it can't get much worse. Wall Street is holding its collective breath.

UBS (UBS) announced today that its chairman, Mark Ospel, will step down amid $19 billion in new writedowns. According to The Wall Street Journal, the Swiss bank expects to lose $12 billion in the first quarter and has asked its board to approve an effort to raise $15 billion in capital.

In an attempt to clean up its balance sheet, UBS sold billions in risky mortgage-related assets. Yet the bank saw its book of illiquid auction-rate securities jump to around $11 billion from $5.9 billion three months ago.

Not to be outdone, American investment bank Lehman Brothers (LEH) said yesterday after the bell that it plans to issue $3 billion in preferred stock to quell solvency fears. Professor Sedacca sees more efforts to raise capital on the horizon for troubled financial institutions.

Deutsche Bank (DB) also announced more pain today in the form of a $3.9 billion dollar hit. The Wall Street Journal reports losses stem from "leveraged loans and loan commitments, commercial real estate, and residential mortgage-backed securities (principally Alt-A)."

Calls for a bottom are rooted in hope, not fact. The U.S. housing market -- the root of the rot -- is still in free fall. Professor Mauldin explained yesterday why the bottom is nowhere in sight. Yet Lehman, UBS and Deutsche are all trading higher on hopes the worst is over. According to many, the U.S. economy won't even experience a recession.

Recessions are natural, even healthy, parts of the business cycle. The government shouldn't head them off at all costs - certainly not by micromanaging markets and directing capital to the places it sees fit. Last time I checked, that's just not capitalism.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opin= =3D =3D3D ion about the performance of securities and financial markets by = the wr=3D iter=3D3D s whose articles appear on the site. The views expresse= d by the wri=3D ters are=3D3D not necessarily the views of Minyanville Medi= a, Inc. or members=3D of its man=3D3D agement. Nothing contained on the web= site is intended to con=3D stitute a recom=3D3D mendation or advice address= ed to an individual investor =3D or category of inve=3D3D stors to purchase= , sell or hold any security, or to =3D take any action with re=3D3D spect t= o the prospective movement of the securit=3D ies markets or to solicit t=3D= 3D he purchase or sale of any security. Any inv=3D estment decisions must b= e made =3D3D by the reader either individually or in =3D consultation with = his or her invest=3D3D ment professional. Minyanville write=3D rs and staff= may trade or hold position=3D3D s in securities that are discuss=3D ed in = articles appearing on the website. Wr=3D3D iters of articles are requir=3D = ed to disclose whether they have a position in =3D3D any stock or fund disc= us=3D sed in an article, but are not permitted to disclos=3D3D e the size o= r direct=3D ion of the position. Nothing on this website is intende=3D3D d = to solicit bus=3D iness of any kind for a writer's business or fund. Mi= ny=3D3D anville mana=3D gement and staff as well as contributing writers wi= ll not respo=3D3D nd to em=3D ails or other communications requesting inves= tment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos