New York (HedgeCo.Net) - Writedowns from major banks have reached the $500 billion mark, only one year after the subprime fallout forced mortgage-backed securities to plummet in value.  And it’s not over.  Some economists estimate that number will ascend upwards to $2 trillion by the time all the damage is done. 

UBS, the European bank hit hardest by the U.S. fueled mortgage crisis, announced its second quarter losses yesterday to be $6 billion, most of which can be attributed to subprime-backed assets. 

This marks the fourth consecutive quarterly loss that the Zurich-based bank has posted. UBS has previously written down over $35 billion since the credit crisis started last summer. 

Other major banks are dealing with the same dilemmas.  Wachovia has already experienced over $22 billion worth of write downs, while Merrill Lynch and Citigroup each have written down over $50 billion.

The current probe launched by New York Attorney General Andrew Cuomo isn’t helping either.  Since major banks are now being forced to buy back bad auction-rate securities, many financial institutions are finding themselves in way over their head.  In addition to the subprime-related mess, UBS has to allocate $20 billion to buy back the shoddy securities from disdained clients. 

In an attempt to restructure, UBS also announced it will separate some key divisions of the company.  The investment bank, which has been experiencing the major losses, will pull away from the bank’s wealth management and asset management divisions. 

UBS hopes to give each section “maximum strategic flexibility.”  While some speculate UBS is positioning themselves to be sold, chairman Peter Kurer has insisted that the companies are not for sale.      

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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