In much more arcane markets like Auction Rate Securities, players continue to play, all face down (while the public focus is intentionally distracted to "hedge funds").
nytimes.com
("No net sales", revisited...)
The problem UBS faces began in August, when the credit markets seized. Corporations — which are big buyers of auction-rate securities because of their slightly-higher-than-money-market yields — were beginning to sell. New buyers had to be found or UBS, as underwriter and auction manager, would be stuck with the securities. The firm was going into shell shock because of losses from subprime mortgages on its books, so it needed to find a way out of the auction-rate mess.
Throughout the autumn, increasingly frantic e-mail messages flew among UBS executives. “As you can imagine during these stressful times, the pressure is on to move our inventory,” wrote David Shulman, global head of fixed income distribution at UBS, on Aug. 30. “I am aware that JPM and Citi are on all ‘alert’ in the same fashion with their retail groups.”
Joel P. Aresco, chief risk officer for the Americas, sent this message on Nov. 15: “Why the continual increase” in the inventory of auction-rate securities? “What measures are being taken to reduce this exposure?”
On Dec. 11, Mr. Shulman wrote: “I am pushing every angle here to move product.”
As it turned out, some of that product being moved was Mr. Shulman’s own stake in auction-rate securities, the complaint said. He testified that he began selling in September, because of his “risk tolerance.” By Dec. 12, he had dumped all his holdings. |
