The Efficiency of Self-Regulation

This is the type of self-regulation that 'free market' true believers like Alan Greenspan argue is the most efficient and effective.

Attorneys of the class action variety take note.

Holders of this CDO and others should hit the exits in a 'free market' response. Aren't 'free markets' wonderful (after the fact)? Perhaps we can declare Manhattan south of Houston Street a 'free market zone' and have 'free streets,' free of all police presence and response. Oh, going out to lunch? Have a good day.

BlackRock CDO Seeks to Drop Fitch Rating After Downgrade Threat
By Neil Unmack

May 27 (Bloomberg) -- BlackRock Financial Management Inc., part of the largest publicly traded U.S. fund company, plans to drop Fitch Ratings from one of its collateralized debt obligations after the firm threatened to cut the deal.

BlackRock's Omega Capital unit asked bondholders to agree to ask Fitch to withdraw its ratings on its Palladium CDO II sold by BNP Paribas SA, it said in a Regulatory News Service statement. The move would leave the CDO with one rating from Standard & Poor's.

New York-based Fitch last week said it may cut Palladium's ratings by as many as four levels after it changed the way it grades CDOs pooling company debt. Fitch's review could threaten downgrades on almost half of top-rated CDOs backed by derivatives. The firm is reassessing its ratings to reflect higher default risks.

CDOs group bonds, loans or credit-default swaps, channeling the income to investors in portions of varying risk and credit ratings.

To contact the reporter on this story: Neil Unmack in London nunmack@bloomberg.net

Last Updated: May 27, 2008 07:41 EDT

Memorial Day 2008 - Remember All Those Who Have Died in the Madness of Hatred and War

We come here to remember those who were killed, those who survived and those changed forever.
May all who leave here know the impact of violence.
May this memorial offer comfort, strength, peace, hope and serenity.
Oklahoma City National Memorial




Et lacrimatus est Iesus.

And Jesus wept.

UBS Says More Mortgage Losses

No wonder UBS Selling Shares at 31% Discount to Market

UBS Falls After Bank Says More Losses From Mortgages Possible
By Elena Logutenkova


May 26 (Bloomberg) -- UBS AG, the European bank hardest hit by the U.S. subprime contagion, fell as much as 3.7 percent in Swiss trading after saying it may face more losses from mortgage securities.

UBS declined 94 centimes, or 3.1 percent, to 29 Swiss francs by 11:28 a.m. in Zurich, the biggest slump among the 59 companies on the Bloomberg Europe Banks and Financial Services Index. UBS has dropped 42 percent this year, cutting its market value to 63.3 billion francs ($61.7 billion).

The bank, in the prospectus for its $15.6 billion rights offer published after markets closed on May 23, said its losses on non-U.S. residential and commercial real-estate securities last year and in the first quarter of 2008 ``could increase in the future.'' UBS is also evaluating whether to limit or discontinue one or more of its U.S. reference-linked note programs, which ``could result in a charge to income,'' it said.

``UBS will have to fight against negative news flow for at least several more quarters,'' said Rolf Biland, who helps manage about $3.1 billion, including UBS shares, as chief investment officer at VZ Vermoegenszentrum in Zurich. ``The U.K. housing market is almost as overheated as in the U.S., and could lead to losses for banks.''

UBS is seeking to replenish capital after about $38 billion in writedowns related to the U.S. subprime crisis. The bank still has more than $45 billion in U.S. mortgage-related assets, $8.6 billion in leveraged finance commitments and $10.4 billion in U.S. student loans on its books.

The company hasn't said how much it holds in non-U.S. mortgage securities. UBS's net exposure to reference-linked notes was $8.9 billion at the end of March. The bank had created 10 such programs, which sold bonds referenced to a pool of asset-backed securities held by the bank, with a face value of $16.9 billion.

To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net;

Chart Updates in the Babson Style For Market Close 23 May 2008

As a reminder all US markets will be closed on 26 May 2008 for the Memorial Day observance.