Putin Threatens to Target Neighbors

Associated Press
February 14, 2008 8:20 a.m.

MOSCOW -- President Vladimir Putin on Thursday repeated his threat to aim Russian rockets at former Soviet satellite states if U.S. missile defense facilities are deployed there.

Speaking about U.S. plans for interceptors in Poland and a radar system in the Czech Republic, Mr. Putin said that "our experts consider that this system threatens our national security and if it appears, we will be obligated to adequately react to this."

"We are warning people ahead of time: if you take this step, then we will make this step," Mr. Putin told assembled journalists at the Kremlin.

Mr. Putin also reiterated that Russian missiles could be aimed at Ukraine, which is pursuing NATO membership, if it agrees to host a missile-defense facility. Mr. Putin first issued that warning in a meeting this week with Ukrainian President Viktor Yushchenko.

Mr. Putin suggested that the U.S. and leaders of Poland and the Czech Republic were going ahead with plans for the missile defense system without asking for public approval, which he called undemocratic.

On the subject of Russian democracy, Mr. Putin -- who must relinquish the presidency under constitutional limits this spring -- said he has no reservations about becoming prime minister under his successor, saying the No. 2 post would give him sufficient power. Russia's premier is responsible for the country's budget, sets economic policy and is responsible for national defense, he noted. Mr. Putin has nominated Deputy Premier Dmitry Medvedev to succeed him, all but guaranteeing the Putin aide will be the next president.

Turning to a sore point in Moscow's relations with the West, Mr. Putin lashed out at the U.S. and other NATO nations over their refusal to ratify an amended version of the 1990 Conventional Forces in Europe Treaty.

Mr. Putin suspended Russia's participation in the pact in December, and on Thursday he said the restrictions Russia faced under the treaty were made unacceptable by NATO's eastward expansion after the 1991 Soviet collapse. He compared them to a situation in which U.S. troop movements from California to Texas would be subject to Russian approval, and declared that "we will no longer fulfill any colonial conditions."

Mr. Putin also addressed Russia's renewal of the Soviet-era practice of flying bombers around the world and close to other countries' borders, saying that Moscow isn't looking for a fight but must conduct the flights to keep its military in shape.

"No clash is planned, and I hope that will never happen," he said.

UBS Falls to Four-Year Low After Posting Record Loss

Feb. 14 (Bloomberg) -- UBS AG fell to a four-year low in Swiss trading after the U.S. subprime mortgage crash led to a record loss and Chief Executive Officer Marcel Rohner declined to predict whether the bank will return to profit this quarter.

Europe's largest bank by assets fell as much as 7.9 percent after reporting a fourth-quarter loss of 12.5 billion Swiss francs ($11.3 billion). Zurich-based UBS took $13.7 billion in writedowns on securities infected by subprime mortgages.

``Further writedowns are likely in at least the first quarter, further impairing confidence and raising the risk of market share losses,'' said Matt Spick, an analyst at Deutsche Bank AG, in a note today. He lowered his recommendation on the stock to ``hold'' from ``buy.''

Rohner, speaking on a conference call with journalists, described the results as ``unacceptable'' and said 2008 will be ``another difficult year.'' Rising U.S. subprime-mortgage defaults have led to more than $145 billion in writedowns and loan losses at the world's biggest financial companies.

UBS fell 2.22 Swiss francs, or 5.4 percent, to 38.64 francs by 1:18 p.m. The stock slumped 39 percent in the past six months, making it the fifth-worst performer in the 60-member Bloomberg Europe Banks and Financial Services Index.

Subprime Writedowns

UBS's writedowns included $10.8 billion on subprime residential mortgages, $2 billion on so-called Alt-A mortgages, which fall between subprime and prime, and $871 million on credit protection purchased from monoline insurers. The bank recorded losses of about $500 million on commercial real estate and about $200 million on loans for leveraged buyouts.

The bank still had about $27.6 billion of positions linked to the U.S. subprime residential mortgage market at the end of the year, down from $38.8 billion on Sept. 28, UBS said. In addition, it reported positions totaling $26.6 billion in Alt-A mortgages, $3.8 billion of subprime-related assets through its reference-linked notes, and $2.9 billion in exposure to credit insurers.

The Group of Seven nations estimates that subprime-related markdowns may swell to $400 billion across the industry, German Finance Minister Peer Steinbrueck said on Feb. 9.

``The rot is spreading to other residential areas,'' ABN Amro Holding NV analysts Kinner Lakhani and Omar Fall said in a note to clients last week. They recommend investors ``avoid'' UBS shares and forecast as much as $10.8 billion of possible further writedowns at the bank.

Wealth Management

The wealth management and business banking division raised fourth-quarter profit 12 percent to 2.5 billion francs, and asset management earnings increased 19 percent to 476 million francs. Clients added a net 31.5 billion francs at the wealth management unit in the fourth quarter.

``The writedowns, even though huge, were flagged,'' said Florian Esterer, who helps oversee $56 billion at Swisscanto Asset Management in Zurich, including UBS shares. ``So far the impact on wealth management remains relatively small.''

The investment bank had a loss in the quarter of 15.5 billion francs, compared with a profit of 1.36 billion francs a year ago. The equities business posted a 5 percent increase in revenue to 2.7 billion francs in the quarter, while revenue from the fixed income, currencies and commodities division was negative 15.5 billion francs. Proprietary trading revenues fell because of ``market dislocation'' across all regions.

Investment Banking Chief

UBS said yesterday it hired Jerker Johansson as head of the investment bank, replacing Huw Jenkins, who left in October as writedowns ballooned. The 51-year-old vice chairman for Europe at Morgan Stanley will join UBS on March 17 after 22 years at the second-biggest U.S. securities firm.

Johansson ``faces many problems at his new firm, including restoring morale, cutting the problem exposures and convincing staff and clients that the investment bank has a long-term future at UBS,'' Peter Thorne, a London-based analyst at Helvea, said in note yesterday.

Rohner, who replaced Peter Wuffli in July, has said he wants the investment bank to cut risks and assets and work more closely with the money-management divisions. He already cut 1,500 jobs at the securities unit and has brushed off calls to sell it.

UBS's main European competitors have so far fared better in the subprime debacle. Frankfurt-based Deutsche Bank, which controls Europe's biggest securities firm by revenue, last week reported a smaller-than-expected decline in quarterly profit, managing to avoid any net writedowns on bonds after booking gains from hedges, and recorded a 44 million-euro ($64 million) markdown on leveraged loans.

Credit Suisse

Credit Suisse Group, Switzerland's second-biggest bank, said on Feb. 12 it took 1.3 billion francs in net writedowns in the fourth quarter. CEO Brady Dougan said the bank is ``well positioned'' in the current markets, which may become ``more constructive'' by the middle of the year.

UBS Chairman Marcel Ospel, 58, and Rohner, 43, told analysts and investors in London on Dec. 11 that record losses were a result of positions created ``by a small group of people in one team.''

To replenish capital, UBS is seeking shareholder approval to sell 13 billion francs in bonds that will convert into shares to investors in Singapore and the Middle East. Chief Financial Officer Marco Suter said today that those investors are firmly behind their commitment.

``The problems that the financial industry faces have not evaporated with the turn of the year,'' Ospel and Rohner said in a letter to shareholders last month.

UBS was created in 1998 by the merger of Swiss Bank Corp. and Union Bank of Switzerland. Swiss Bank was established in 1854.

Shareholders including the Ethos Foundation are calling for a special audit into the bank's risk controls and a replacement of Ospel, who said in December he isn't thinking of resigning. The Swiss Federal Banking Commission has also initiated an investigation into reasons that led to the bank's subprime holdings and subsequent writedowns, as well as risk management.

Justice Dept: Waterboarding Not Legal

By LAURIE KELLMAN – 1 hour ago

WASHINGTON (AP) — A senior Justice Department official says laws and other limits enacted since three terrorism suspects were waterboarded have eliminated the technique from what is now legally allowed.

"The set of interrogation methods authorized for current use is narrower than before, and it does not today include waterboarding," Steven G. Bradbury, acting head of the Justice Department's Office of Legal Counsel, says in remarks prepared for his appearance Thursday before the House Judiciary Constitution subcommittee.

"There has been no determination by the Justice Department that the use of waterboarding, under any circumstances, would be lawful under current law," he said.

It is the first time the department has expressed such an opinion publicly. CIA Director Michael Hayden stopped short of making a similar statement in testimony about waterboarding before Congress last week.

Bradbury in 2005 signed two secret legal memos that authorized the CIA to use head slaps, freezing temperatures and waterboarding when questioning terror detainees. Because of that, Senate Democrats have opposed his nomination by President Bush to formally head the legal counsel's office.

Bradbury's testimony comes as majority Democrats in Congress try to clamp down on interrogation methods that can be used on terrorism suspects.

Congress on Wednesday moved to prohibit the CIA from using waterboarding and other harsh tactics, despite Bush's threat to veto any measure that limits the agency's interrogation techniques.

The prohibition was contained in a bill authorizing intelligence activities for the current year, which the Senate approved on a 51-45 vote. It would restrict the CIA to the 19 interrogation techniques outlined in the Army field manual. That manual prohibits waterboarding, a method that makes an interrogation subject feel he is drowning.

The House had approved the measure in December. Wednesday's Senate vote set up a confrontation with the White House, where Bush has promised to veto any bill that restricts CIA questioning.

The legislation bars the CIA from using waterboarding, sensory deprivation or other harsh coercive methods to break a prisoner who refuses to answer questions. Those practices were banned by the military in 2006.

In testimony before the House Intelligence Committee, CIA Director Hayden acknowledged for the first time publicly that the CIA has used waterboarding against three prisoners.

Hayden said current law and court decisions, including the Detainee Treatment Act of 2005, cast doubt on whether waterboarding would be legal now. Hayden prohibited its use in CIA interrogations in 2006; it has not been used since 2003, he said.

The Detainee Treatment Act of 2005 prohibited cruel, inhuman and degrading treatment for all detainees in U.S. custody, including CIA prisoners.

Waterboarding is still officially in the CIA tool kit but it requires the consent of the attorney general and president on a case-by-case basis.