Big banks face break-up calls in subprime wake

[flashl]

Source: Reuters

ZURICH (Reuters) - Battle lines are forming in banking that pit bigger-is-better against break-up advocates, and some of the largest conglomerates -- like subprime victims UBS (UBSN.VX: Quote, Profile, Research) and Citigroup (C.N: Quote, Profile, Research) -- could fall prey.

Such sprawling financial groups are facing pressure from regulators and shareholders to look back to the future and simplify, sell assets and focus on what they do well.

Big banks have long held that they profit from broad strategies in two ways: one business unit often feeds another, and diversified activities lessen earnings volatility.

...

In a parallel case, Citigroup faced criticism from a former senior executive that the $166 billion megamerger he helped mastermind in 1998 and that made it the world's largest financial company was a mistake.

Reuters

Read more: http://www.reuters.com/article/ousiv/idUSL0422945220080404?pageNumber=2&virtualBrandChannel=0

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Is the 'big bank' era coming to an end?

[Me.]

1. And So The Notion Of A One World Government Drops Off The Cliff

"We are not convinced that the ‘one bank' integrated business model ... will survive the damage inflicted by the proprietary trading losses and write-downs," Arnold wrote.

“The eight month-long battle that saw ABN AMRO taken over and broken up started with a single activist, who sent a letter in February 2007 to top management arguing there was more value in the sum of the parts than in the conglomerate as a whole.”

Someone told me that the UBN shareholders were so angry that they tossed the president of the bank out on his ear. Haven't been able to confirm it with a google yet.

[L0oniX]

2. DIE Citigroup. I hate them and their damn credit card spam.

They make my shredder smoke.

[cliss]

3. Notice the reuters source?

= Zurich.

Last week, I was absolutely knocked over by the newest banking Fatality: UBS (Warburg). The article claimed that the bank was going to write down losses of around $162 billion (?)

Now when a SWISS bank flirts with insolvency, you know that things are really bad. The Swiss have never been seen as Riverboat Gamblers, it's considered the safest place to put your money.

Guess I was wrong, huh?

[FarCenter]

7. UBS bought Paine Webber

Probably a bad idea to get into the US investment banking market.

[AdHocSolver]

4. Most mergers have been a scam to make huge profits for the INSIDERS.

Studies have shown that most mergers and leveraged buyouts cause the companies involved to lose value. However, the insiders who make the deals walk away with huge profits.

The scheme, in a nutshell, involves talking the price of the stock up, a la Enron, in which the top executives are given large piles of stock for their efforts. Immediately after the merger or buyout, in which one or both companies involved takes on huge amounts of debt, the "new", larger company starts eliminating duplicate human resources such as personnel, marketing, data processing, purchasing, etc. In other words, they fire a lot of people.

This downsizing boosts short term profits. The investment "experts" see this and start pushing the suckers into investing in the new "leaner" company. This drives the price of the stock up initially, and the insiders and the investment "experts" sell their shares for huge profits.

Eventually, the new company winds up paying off this new debt and, with NO increased income from increased sales, the profits drop real fast. So the new company resulting from the merger has merely traded reduced labor costs for increased debt. Eventually, the suckers see what has happened and stop buying the stock and its price drops. However, the insiders have already bailed out and made millions.

The truly amazing thing is how many times this scam is pulled and is successful.

[InkAddict]

5. And those support staffers have a hard time even staying long

enough to be eligible for a 401(K); just long enough to train the furiner's.

When the healthcare forms get passed around, it's easy not to have a 6-month prior pre-existing condition, because you haven't even had the time or luxury of seeing a doctor/dentist/vision or hearingcare provider for any condition in years. You know you should go; you don't want to be diagnosed with anything.

You fear taking a sick day much less a well-deserved vacation. You are damned if your co-workers take up the slack in your absence and the boss notices they don't require your services anymore. OTOH, no one does it, and you return to a pile that's impossible to resolve to your bosses satisfaction; hence, you're not doing your job.

[samsingh]

6. they haven't performed in the public's interest

and insiders and friends must have made out like bandits