I’m working on a larger piece on the UBS whistleblower, Bradley Birkenfeld, so I’ve been following news of the bank rather closely. One exchange from the Congressional hearings on AIG regarding UBS caught my eye so I decided to put the piles of research I’ve done on it to good use. My editor liked the blog post and promoted it to the Top Stories slider. (I led the site for about an hour—the bureau chief’s Twitter-heavy review of the Obama and GOP question session knocked me into the second slot.)
UPDATE 2: My reporting was featured in a Media Consortium post about the implications of the Citizens United Supreme Court decision, which has allowed unlimited corporate cash in US elections. Their post was republished on the Huffington Post, AlterNet, FireDogLake, Daily Kos, Open Salon, MyDirectDemocracy, and the Canadian site Rabble.
UBS was one of eight large investment banks that benefited from the now-infamous backdoor bailout of AIG—resulting in government cash infusions totaling $182.5 billion—in the dark days of September 2008. At the hearing, the Special Inspector General for the Troubled Asset Relief Program, Neil Barofsky, revealed to the House Oversight and Government Reform Committee that UBS was the only bank willing to settle its soured credit default swaps (CDS) contracts for less than their face value. Why did UBS play ball when all the other banks didn’t? As the Washington Independent reported, “Barofsky speculated that the firm probably simply recognized that the American taxpayers ‘had taken the global economy on its back.'”
The financial crisis has proved time and again, big banks don’t account for taxpayers—except when they need their help. And that’s the more likely explanation for UBS’ good behavior during the AIG rescue. Like the rest of the global financial industry, UBS was hurting from the subprime mortgage meltdown. (The bank’s colossally bad bet on the US housing market—it had already written down $38 billion in bad loans as of April 2008—earned UBS the nickname Used to Be Smart.) But unlike its intransigent peers on Wall Street, the Swiss banking giant also faced the mounting threat of a US federal investigation. It was in no position to play hardball.
Click here to read the rest of this MoJo Top Story and to make a comment.
Photo credit: Allie_Caulfield (via Flickr)