Last week, UBS announced a 2nd Quarter loss “due to restructuring charges.” The banking giant is raising $3.45 billion in a stock sale.
Partly owned by the Swiss government (for years prior to the crisis, if memory serves), UBS was one of the biggest losers in the financial crisis. After a huge expansion into riskiest businesses at the peak of the market, they have had steep losses and enormous write-downs. Since then, they have laid off tens of thousands of workers. (Aside from UBS’ tax problems).
One such worker who has escaped such an ignominious firing is former Texas Senator Phil Gramm. He was hired in 2002 to “advise clients on corporate finance issues and strategy.” This was around the same time that UBS acquired Enron’s energy trading operations. Recall Gramm’s wife Wendy was on the board of Enron, which was up til then the US’s biggest bankruptcy. You can insert whatever revolving door complaint about polticos you want here, but by now its almost besides the point.
Gramm’s position at UBS is “vice chairman” — dubbed “the greatest job in business” for its combination of high status and low work rate. It is a do nothing patronage role that is reward for all the Wall Street friendly legislation Gramm has sponsored. At least, they used to be considered Wall Street friendly, prior to their leading to the Street imploding.
To me, the more significant issue is how respected Gramm’s radical deregulation philosophy was — at least at the time — by the biggest of global investment houses. His philosophy rationalized the irresponsible investing behavior of these big banks.
I almost feel bad for Gramm. His cognitive dissonance and now discredited philosophy must be of little comfort to him in his twilight years.
Meanwhile, plenty of folks at UBS have told me he is an embarrassment to the firm.
Which raises the question: What exactly does Gramm do for UBS these days? Other than hang around as a reminder of bad decision making and his scheme of radical deregulation, does he really add anything to their bottom line? Or are they simply too embarrassed to throw the bum out?
If anyone can advise me as to why he is still gainfully employed at a large investment house that is suffering from enormous losses, I am all ears.
Phil Gramm: A Deregulator Unswayed (November 17th, 2008)
Amity Shlaes Does Not Know What a Recession Is (July 12th, 2008)
UBS Expects Second Quarter Loss
WSJ, June 26, 2009,
Phil Gramm’s UBS Problem
Slate, July 7, 2008, at 5:58 PM ET
Senator Phil Gramm to join UBS Warburg
UBS, October 7, 2002