UBS (NYSE: UBS) may have sold a huge portion of its high-risk mortgages at an extremely large write-down. And, that may show up in it Q1 results, driving a big loss.

According to Reuters "Analysts said they believed UBS had sold its Alt-A investments — U.S. mortgages ranked between prime and subprime — to U.S. bond manager Pimco."

The probable action by UBS raises an important disclosure question. Should the Fed force US banks to immediately report liquidations of large positions of securities which have fallen in value? Probably so, since the actions would be viewed by the SEC as "material".

Right now, US banks are unlikely to allow investors to see what they have done with their balance sheets until the end of a quarter. The details may not come out until a 10-Q or 10-K is filed. That puts shareholder well behind the curve in terms of what management knows about its business.

Putting stockholders of big banks and brokerages in the dark only has one advantage. It keeps them from selling shares while banks try to raise more capital. By deferring panic, banks buy time.

But, the investor gets shafted in the process. A bank could sell billions of dollars in subprime or consumer credit-backed paper at $.20 or $.30 on a dollar and the news might not come out until quarterly numbers are reported.

Banks probably have an obligation to report these transactions whether they do so or not. It is not just a legal imperative, it is an ethical one.

Douglas A. McIntyre

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