[ by Larry Goldfarb ]

The decision by UBS to eliminate a division and layoff or fire 10,000 workers is as predictable as it is macabre.  Union Bank of Switzerland came to the US in the 80s with a business model that relied on lending and investing utilizing its AAA credit rating.  In fact, the major strategy that the bank employed was to maintain the unique rating – only a few global banks maintained the AAA at the time.

Switzerland would begin to get a whiff of the success of the bulge bracket firms in the more traditional fixed income products and then prod NY to enter those businesses successfully.  What followed was a series of starts and stops.  UBS would make money, lose money then exit.  During my tenure at UBS, for example, the Bank closed the mortgage business line at least twice – firing all of the employees.

The bank liked to view the success of others than enter the business once success was proven.  After the Dot Com bubble burst, in 2002, it began to hire hot shot bankers from firms like Credit Suisse and Goldman to run different varieties of a fixed income derivative business.  UBS entered those businesses well after it hit their peak.  That strategy resulted in some gains, but deep, deep loses.  In short, while the casual observer may be surprised by the UBS move, I am not, not at all.