The Five Dumbest Things on Wall Street

You'll Be Sorry, UBS

Alone we stand, together we fall apart, or at least that's the thinking behind Swiss bank UBS' (UBS Quote) latest attempt to overcome what's become quite a discouraging financial quagmire.

On the heels of a second quarter that reasserted UBS' place among the worst-performing institutions in recent years, the Swiss bank is looking to break up its dysfunctional family of financial services.

Monday's earnings statement was not good. UBS swung to a $329 million loss from a $5.1 billion profit a year ago, expanding its streak of widening losses to a full four quarters. On top of that crater, the company's asset writedowns tied to the subprime meltdown grew to an ignominious total of $43 billion.

In response to shareholder disgruntlement, the bank said it would "reposition" itself, separating its wealth management, investment banking and its asset management segments into more autonomous units in a bet that the three businesses will operate better separate than together.

Greater autonomy for its segments might paint a rosy picture if any of UBS' businesses could offer any confidence. With an investment bank that is, at best, frowned upon -- if not outright sneered at -- on Wall Street and a wealth management business that is rapidly losing wealth, it's difficult to believe that the breakup will leave UBS feeling any more fulfilled.

Quarantining the investment bank may be a good idea, but UBS' chairman's protest that the company has "no specific plans to dispose of any business unit at this time" reflects a growing sense that the best place for that subprime-mangled business might be the dustbin.

Meanwhile, an investigation by the Internal Revenue Service and a lawsuit by New York state Attorney General Andrew Cuomo are increasingly driving clients away from the wealth management segment -- to the tune of $41 billion in net new money outflows in the quarter. That's triple the big-money leakage UBS saw in the first quarter. And according to Bloomberg, 140 UBS client advisers jumped ship in the same period.

Breaking up is hard to do, but in this case, it may just be that UBS' ailing business units deserve each other.

-- by Mike Taylor

Dumb-o-meter score: 91. Maybe UBS believes that three bad banks are better than one.