(Image courtesy of PBS)So Today UBS is getting a $60B dollar bailout from the Swiss Government. In essence, UBS will put $54B of its toxic assets (i.e. subprime mortgages) up as collateral into a fund administered by the Swiss Central Bank, and in exchange, will get the $54B in cash. That by itself is a pretty sweet deal for the Swiss banking giant, but it gets even better. The Swiss National Bank will also give UBS 6B Swiss Francs (~$5.2B) in cash with no mention of any kind of repayment. The $54B will carry an interest rate of LIBOR + 2.5%.
Chatter is now beggining about the looming economic crisis (not to be mistaken with the financial crisis). As Nikolas Sarkozy said: "If we can bring coordinated answers to the financial crisis, can we not bring coordinated answers to the economic crisis?" Of course, Gordon Brown agreed and said that "EU leaders had agreed on the need to reform the international financial system."
The 27 EU leaders and now calling for 'co-ordinated' action to combat the economic decline and the major new initiative is the backing for an overhaul of the Bretton-Woods Agreement, which was established in 1944. Lets not forget that Bretton Woods was the place where such great ideas as the IMF and World Bank came from. These institutions have contributed very little in terms of economic stability, but have contributed a great deal by creating vast sums of third-world debt. For more information on this subject, please see John Perkin's amazing book: Confessions of an Economic Hitman.
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