UBS (UBS) telegraphed all ships in the known world as it sank into the Atlantic like the Titanic. The big bank will fire 5,500 poor souls and sell $15 billion of its subprime mortgage securities portfolio to Blackrock (BLK). If the financial crisis worsens, Blackrock may rue the day it cut the deal.

According to The Wall Street Journal "UBS, which is whittling down its mortgage holdings, said it will continue efforts to offload the sizable book of distressed assets."

One of the things observers can count on from Wall St. is that when there is smoke there is fire. If UBS has these problems, other firms have them to a greater or lesser extent. But, they have them.

It is beginning to dawn on the people who created the mortgage-backed securities market that the first wave of defaults on subprime loans is now being followed by a second, and perhaps larger, traunch with a huge number of ARMs resetting this summer. While UBS may have had a large balance sheet exposure, most banks were trying to chase returns in the same market. Almost all of them, with the exception of Goldman Sachs (GS) loaded up the subprime truck to move to Beverly.

The UBS lay-offs are a sign that the number of unemployed leaving the financial district will certainly rise. Citigroup’s Pandit has said he will cut the bank’s operating costs by 20%. Some of that will come out in people, perhaps most of it. Morgan Stanley (MS) has cut 5% of its staff.

If each large bank and brokerage has another 5% to go in head-count reduction, the term HR people use to make firings impersonal, another 100,000 jobs could move out of downtown Manhattan and the other places the financial firms house their people.

Douglas A. McIntyre

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