Credit Suisse should be revived

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“It is useless to hope that UBS will spin off the Swiss banking subsidiary of Credit Suisse to prevent massive layoffs and imbalances in the Swiss banking market.” Finanz und Wirtschaft commented on this on Wednesday.

Hopfried Stutz has these illusions. Everything else is unacceptable. Not so much because of mass layoffs, but because of the imbalance in the Swiss banking market.

The same “Finanz und Wirtschaft” says how much pension funds have been affected by this catastrophic development. CS is especially busy with local pension plans. For a fee, he holds hundreds of billions of francs worth of securities in trust. However, he primarily earns money by managing the assets of institutional investors such as pension funds. UBS is not idle in this area either. Pension fund officials have already expressed fears that the now unparalleled giant will dictate terms.

This is just one of the reasons why we must not allow an already existing imbalance to widen. “The gigantic UBS organization must be crushed,” Thomas Minder, an independent member of the Schaffhausen State Council, told the Blick newspaper on Tuesday. Middle Council member Beat Reeder made a similar statement Wednesday at Walliser’s Bote.

The United States once showed how this can be done. Oil tycoon John D. Rockefeller became the first known dollar billionaire with his Standard Oil Company. This was at the end of the 19th century. He could dominate the markets at will, until the state put an end to his activities and in 1911 divided the oil giant into 34 separate companies.

70 years later, the American Telephone and Telegraph Company met the same fate. It became so monstrous that it was smashed at the initiative of the Department of Justice. Since then, AT&T has only been allowed to handle long distance calls. This created seven regional telephone companies – Baby Bells, which are responsible for local networks and switching centers in their region.

At times, US banks were prohibited from opening branches outside their state. At the same time, savings and loan banks were not allowed to deal in securities and vice versa.

These are measures to prevent companies from becoming too big, too powerful, and too risky – in other words, “too big to fail.” First of all, these are measures to ensure fair competition.

It is hard to imagine that Switzerland will dismember the new banking giant with the same consistency as the United States once did. At the very least, one can hope that UBS will voluntarily or under duress resize itself and sell off risky areas of investment banking.

That’s why we’re under the illusion that Credit Suisse’s Swiss business will rise from the ashes with one name or another, like Phoenix.

Source: Blick