Auction Rate Securities are toxic at UBS Monday, June 30, 2008
Image via WikipediaIt is amazing that banks continue to use email given that they regularly are the means by which they hang themselves. In the latest episode, William Galvin, secretary of the Commonwealth of Massachusetts, subpoenaed documents from UBS which revealed that they were desperate to get rid of their holdings in auction rate securities from their balance sheet and dump them onto any unsuspecting victim / client. Meanwhile, the firm stuck to the public line that these remained highly liquid instruments.
When the $300bn ARS market seized up in Q108, many investors found themselves unable to liquidate at any price, albeit often receiving interest rates far in excess of the market rate.
The International Herald Tribune has the story here. It seems inevitable that UBS will be hit hard both financially and reputationally given the apparent mis-selling the emails suggest.