UBS Buys Credit Swiss

Large bank bailout just starting

“This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure,” said UBS Chairman Colm Kelleher in a statement.

“The Swiss National Bank also pledged a loan of up to 100 billion Swiss francs ($108 billion) to support the takeover.” - CNBC

Why wouldn’t UBS buy Credit Swiss if the Swiss National Bank is willing to back stop UBS with $108 billion in loans for a $3.2 billion failed bank?

Governments are taking extraordinary measures to contain the damage and ensure confidence in the banking system, but if there are more poor risk management cases at small banks, it could lead to a loss of trust in regional banking or more regulation for smaller banks. The crisis could also compel the Fed to cool on rate hikes.

If Silicon Valley Bank was a on off event, the chart below does not confirm it.

More usage of the Fed’s Discount Window exceeded 2008’s record. This is not a good thing. Combined this with the UBS | Credit Swiss deal and you go your self a major banking stability problem.

When the Bank of Canada, Bank of England, Bank of Japan, European Central Bank the Federal Reserve and Swiss National Bank step in to backstop banks through out the world, this is a sign that there is not enough money in the world. A shortage of US Dollars for sure.

The US Dollar is the reserve currency of the world. The Federal Reserves combined actions of raising Fed Funds Rates and Selling Off of their Balance Sheet takes US Dollars out of the system. Now Central Banks around the world are reversing course, even though they say it isn’t QE, it is.

Yet Futures are Flat

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