Banking crisis moves to Swiss firms (UBS)

No one should be surprised. Swiss bank UBS (NYSE:UBS) seems to take a big mortgage-backed paper write-off about once a month. It is amazing the firm is still in business.

But, matters have gotten much, much worse. The Swiss government has had to step in to save UBS, one of the world's largest banks. Aside from making a $5.3 billion investment in the banks for 9% ownership, the government will take may of the firms worst assets. According to the FT, "UBS, Europe's largest casualty of the US credit crisis, would also transfer $60bn - the overwhelming majority - of its illiquid US securities to a new entity owned and controlled by the Swiss National Bank."

The idea that one bank would need over $65 billion in aid makes it remarkably clear that the credit crisis in not nearly over and that the Paulson plan to put $250 billion into large US banks may only be of temporary help. Troubled assets keep coming out of the walls, and it is not clear if there is any end to it on the horizon.

The deepening recession in the US is partly due to the continuing drop in housing prices. That market remains the one where banks have their greatest exposure. The value of mortgage derivatives may fall for several more quarters.

The stock indexes dropped sharply yesterday, with banks leading the way. The market is wise. Earnings at financial companies are going to be under greater pressure, not less.

Douglas A. McIntyre is an editor at 247wallst.com.