Today's Credit Crunch

Posted by Noah Rosenblatt on December 10, 2007 at 4.34 PM

A: It still amazes me how hopes over rate cuts can cloud investors bets' and make them ignore news. Consider this just a brief overview of what news came out today pertaining to the ongoing credit crunch. I'll leave it up to you to decide whether its getting better or worse.

First: UBS To Take Further $10 Billion Write-down

Swiss banking giant UBS (NYSE: UBS) warned that it will write down the value of its subprime mortgage holdings by a further $10 billion, leading to a loss in the fourth quarter and potentially wiping out all its profits for the year. It also detailed an $11.5 billion capital injection from Singapore and the Middle East. In a bid to soothe the bad news, the bank also announced plans for a capital injection of 13 billion Swiss francs ($11.5 billion) from the government of Singapore and an unnamed investor in the Middle East. The plans would give Singapore a roughly 9% stake, making it the Swiss group's biggest shareholder.

"Conditions in the U.S. mortgage and housing markets have continued to deteriorate, and we have updated our loss assumptions to the levels implied by the current distressed market for mortgage securities," said CEO Marcel Rohner in a statement. "In the last several months, continued speculation about the ultimate value of our subprime holdings -- which remains unknowable -- has been distracting," Rohner added. "In our judgment these write-downs will create maximum clarity on this issue and will have the effect of substantially eliminating speculation."

With the latest announcements, UBS has recorded $13.7 billion in write-downs, more than any European bank.

Second: Bank of America Closing Money-Losing Fund

(NYSE: BAC) According to The Wall Street Journal, the fund was worth $40 billion several months ago but has dropped to roughly $12 billion. The fund, a short-term investment pool for investors willing to put in at least $25 million, was closed after several clients took out their money.

The fund was a so-called "enhanced cash fund," essentially a version of a money-market fund that puts its money in riskier investments. The Journal said a rapid decline in the price of the fund's mortgage-backed securities led to clients taking out their money.

Third: Washington Mutual Cuts Dividend, Slashes Jobs, Sets Capital Infusion

Washington Mutual (NYSE: WM) , the U.S. savings and loan slammed by slumping mortgage markets, on Monday said it would slash its dividend, cut more than 3,000 jobs and announced a $2.5 billion capital infusion.

The Seattle-based bank also said it expects to report a net loss in the fourth quarter after recording non-cash write-downs.

Ahhh, sounds like all is fine & dandy in creditville! Looking good Big Ben! Feeling Good Mr. Paulson!!!