Breaking Up UBS (UBS)? The Most Complex Job In The World

Revenge is a dish best served cold. The former CEO of UBS (UBS), pushed out by the bank’s current chairman, has suggest that the huge financial firm be broken up.

According to The Wall Street Journal the proposal is that "UBS should legally separate its investment bank from its private-client bank and ultimately sell the investment bank; it should sell its asset-management business to raise money."

Unfortunately, there is no way to know whether the program makes sense. It is not like the notion, which has floated around for at least two years, that Citigroup (C) be broken into parts with its investment bank, corporate bank, wealth management, and consumer bank becoming four entities. With huge write-downs over the last two quarters and an unclear picture of Citi’s future difficulties determining the values of the pieces of the pie has become remarkably complex.

It is also not unlike the proposals to split monoline bond insurers Ambac (ABK) and MBIA (MBIA) into two parts, one which would hold the safe muni-bond operations and one which would take troubled mortgage derivatives.

In the end, the math has become almost too complex, even for Wall St.’s best minds. This is because issues of liabilities have gone from a regular part of doing business as a financial institution to being a mine field of poorly understood pools of paper. The values of these depend on forces in the credit markets and economy which are far afield of where banks normally would invest capital.Mutations often end up  being very different from the host.

There will be no big busting up of any of the large money center banks, brokerages, or insurance companies for now. No one knows how to do the math.

Douglas A. McIntyre