1:23:33 Here’s a great story, a friend of mine went to Japan a year ago, was talking with one accountant, and he was talking about investing in some subprime securities, and the accountant said, ‘no, no, no, I don’t want any subprime securities, I want a CDO.’ [laughter] So, you know, that’s, yeah, there’s an issue, but I … – Tom Zimmerman,¹ UBS fixed income analyst, March 28, 2007

So what’s the big tickle?²

….

And it’s fair to assume that Pursuit wasn’t the only hedge fund or institutional investor buying “crap” from UBS in the summer of 2007. The Pursuit case looks like it could become a much bigger headache for UBS than anyone imagined.

Matt Goldstein and the gang at Reuters are all over this story of allegations that UBS may have had advance knowledge that Moody’s had doubts about some of their bonds.  But the Swiss bank’s top research boffin had been cracking that joke en plein air months earlier, on an internet video for Pete’s sake.  And if the debt buyers’ due dilly officers hadn’t been tipped off by Tom’s crack, surely his blood-curdling PowerPoint should have provided ample cause for pause.

Really battle hardened veterans of The Castle will recall that I first posted on this on May 7, 2007, still well ahead of the events at issue in the present stushie.  At the time I footnoted Tom’s quote with this …

[5]: A Collateralized Debt Obligation (CDO) in this context is a security cobbled together from the sludgiest bits of the the subprime MBS. There will likely be a detailed discussion in a future episode of [1].

Well, I was right about that one, there are now 5 episodes in that series, and Doom’s got detailed transcripts of all of them.  The truth’s out there, if you want it

——————

[1]: "AEI Subprime I: Complete Annotated Transcript", Housing Doom September 6, 2009.

[2]: "UBS’ days of wine and CDOs", by Matthew Goldstein, Reuters, September 14, 2009.

As I pointed out in a column, the real issue in this lawsuit is one of insider trading — whether UBS, which says it expects to prevail in this case, was taking advantage of Pursuit with information it had gotten from those private conversations with Moody’s.

On that score, the most damaging email may be one from July 2007 that alerts UBS’ trading desk to an upcoming meeting between Moody’s and the investment bank’s chief risk officer. Moody’s was arranging the meeting with UBS and other investment banks “to discuss impacts” of potential downgrades to subprime-mortgage backed securities.

The email indicates that higher-ups on the UBS trading desk were alerted to these potential rating changes.

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