Glory
April 1st, 2008, 11:03 PM
UBS to Write Down Another $19 Billion
The mortgage crisis set off fresh shock waves Tuesday, with the biggest banks in Switzerland and Germany announcing huge write-downs totaling $23 billion, adding to the hundreds of billions in losses that financial firms already face from the subprime mortgage fallout.
Despite the continuing global tide of red ink, investors seized on hopes that the crisis may have hit bottom. Dow Jones industrial average surged more than 3 percent, or nearly 392 points.
They were also encouraged by announcements that UBS of Switzerland is close to raising $15 billion in fresh capital and Lehman Brothers is close to raising $4 billion, a sign that investors have not given up on banks.
Even so, some analysts say that the optimism may be premature, reflecting wishful thinking more than economic realities.
"The market has been consistently wrong each time they tried to find a bottom," said Meredith Whitney, an analyst at Oppenheimer & Company, noting that earlier stock rallies in January and last fall were overwhelmed by more bad news.
"There's a 'hooray' from the stands, but investors don't realize the bench has been weakened," she said. "There's no end in sight in terms of bad news."
Indeed, a report issued Tuesday by Morgan Stanley concluded that investment banks face their worst crisis in 30 years, surpassing the global financial upheavals of 1998 as well as the stock market crash of 1987. It projected that investment banking revenue will drop another 20 percent this year, and financial firms will report a further $75 billion in markdowns on top of what they have announced so far.
"There have been several false dawns during this crisis," said Lawrence H. Summers, who confronted the financial shocks of the late 1990s as Treasury secretary under President Bill Clinton. "One can't be at all confident the worst of this is behind us."
Full story:
http://www.nytimes.com/2008/04/02/business/worldbusiness/02ubs.html?_r=2&hp=&oref=slogin&pagewanted=print&oref=slogin
The mortgage crisis set off fresh shock waves Tuesday, with the biggest banks in Switzerland and Germany announcing huge write-downs totaling $23 billion, adding to the hundreds of billions in losses that financial firms already face from the subprime mortgage fallout.
Despite the continuing global tide of red ink, investors seized on hopes that the crisis may have hit bottom. Dow Jones industrial average surged more than 3 percent, or nearly 392 points.
They were also encouraged by announcements that UBS of Switzerland is close to raising $15 billion in fresh capital and Lehman Brothers is close to raising $4 billion, a sign that investors have not given up on banks.
Even so, some analysts say that the optimism may be premature, reflecting wishful thinking more than economic realities.
"The market has been consistently wrong each time they tried to find a bottom," said Meredith Whitney, an analyst at Oppenheimer & Company, noting that earlier stock rallies in January and last fall were overwhelmed by more bad news.
"There's a 'hooray' from the stands, but investors don't realize the bench has been weakened," she said. "There's no end in sight in terms of bad news."
Indeed, a report issued Tuesday by Morgan Stanley concluded that investment banks face their worst crisis in 30 years, surpassing the global financial upheavals of 1998 as well as the stock market crash of 1987. It projected that investment banking revenue will drop another 20 percent this year, and financial firms will report a further $75 billion in markdowns on top of what they have announced so far.
"There have been several false dawns during this crisis," said Lawrence H. Summers, who confronted the financial shocks of the late 1990s as Treasury secretary under President Bill Clinton. "One can't be at all confident the worst of this is behind us."
Full story:
http://www.nytimes.com/2008/04/02/business/worldbusiness/02ubs.html?_r=2&hp=&oref=slogin&pagewanted=print&oref=slogin