UBS helps foreign hedge funds dodge U.S. taxes

Why does UBS appear to have lost its moral compass? According to a former trader at UBS, the Swiss headquarters is very dependent on "financial mercenaries" in London and New York who had been generating the bulk of UBS's profits. They did so by taking on all sorts of risk -- "exploiting the bank's AAA rating, while ignoring even fundamental risks of finance - for example, mixing short with long positions. Huge sums of subprime debt were bought cheaply and placed in inventory so they could draw upon it at any time," according to my source. These mercenaries threatened to quit and take their teams with them if they did not get big pay increases. And the Swiss lacked the will to reign them in.

Phil Gramm is vice chairman of UBS and resigned as McCain's chief economic advisor after giving an interview in which he said that America was in a "mental recession" and it was "a nation of whiners." As a top executive of a Swiss bank that stands accused of ripping off investors and the U.S. Treasury, Gramm reflects the values of a bank whose profits depended, in part, on belittling its customers and the U.S. government.

And if, like McCain, you don't know how many houses you own, then it's possible that you share Gramm's view that Americans are whiners. But if you happen to be an American who disagrees with them, and with UBS's market conduct, you have a chance to put a stop to it in November.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citi shares and has no financial interest in the other securities mentioned.