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President Obama and Robert Wolf

Posted by Larry Doyle on February 2, 2010 3:02 PM |

I have debated writing about Robert Wolf.

Who is Robert Wolf? The CEO of UBS Group Americas and one of if not the closest adviser President Obama has on Wall Street. Wolf was profiled in The Wall Street Journal on January 23rd, Obama’s Lead Blocker on Wall Street:

Mr. Obama has at least one buddy in the banking business: a former University of Pennsylvania fullback and ex-Salomon Brothers bond trader who now serves as an outside White House adviser.

Robert Wolf, chief executive of UBS Group Americas, first met then-Sen. Obama at the office of George Soros.

Mr. Wolf has visited the White House nearly 20 times since Mr. Obama moved in last January. Mr. Wolf lunched alone with the president in June. He joined him July 4th to watch the national fireworks from the White House lawn. They golfed together on Martha’s Vineyard in August.

Making the relationship all the more unusual is that Mr. Wolf works for a foreign bank that agreed last year to pay the U.S. government $780 million to settle accusations that it had helped defraud the Internal Revenue Service. The Justice Department alleged that UBS helped 52,000 wealthy Americans hide billions of dollars in assets to avoid U.S. income taxes. Obama aides say they determined early on that the U.S. arm of UBS wasn’t involved in the alleged tax fraud.

Mr. Wolf says that the fisticuffs between Mr. Obama and Wall Street haven’t strained their friendship. The rapport between the White House and the banks, he says, “is dynamic, kind of like our industry: Some days the markets are volatile and others times they work smoothly.”

The two men first met in December 2006 in the New York office of billionaire investor George Soros. Mr. Wolf was a newcomer to elite Democratic donor circles. Then-Sen. Obama, still months from launching his bid for the White House, was desperate to raise campaign cash on Wall Street.

Mr. Wolf slipped the senator his business card. He got a call from Mr. Obama the next morning. “I picked up the phone and said, ‘Yeah, sure, this is really Obama.’ And it was.” The two men dined twice in Washington over the next month. A few weeks later, Mr. Wolf hosted New York’s first Obama fund-raiser. The event, at UBS’s Manhattan offices, drew nearly 200 people and raised $350,000 in three hours, Mr. Wolf says.

Mr. Wolf’s fund-raising clout helped seal a bond, despite their divergent personalities—a onetime bond trader and obsessive Little League coach hitting it off with a bookish former community organizer.

“Many of us were jealous,” says hedge-fund chief Jim Torrey of the Torrey Funds, an initial Obama fund-raiser. “He had Obama’s personal cellphone number, and the two of them talked all the time. They just sort of adopted each other.”

At a debate in July 2007, former Alaska Sen. Mike Gravel took a dig at Mr. Obama for saying he spurned all lobbyists while accepting cash “from a Robert Wolf at USB [sic] Bank.” By then, U.S. employees of UBS had contributed more than $200,000 to the Obama campaign.

Two weeks later, Mr. Wolf took a call from Mr. Obama that he says changed their relationship. The two talked in depth about the country’s rising economic woes. Bear Stearns was wobbly. Foreclosures were skyrocketing. And some units within UBS itself were racking up losses. The bank later had to write down more than $50 billion in illiquid securities as part of the subprime-mortgage crisis. The losses came from a portion of the bank not directly under Mr. Wolf’s purview.

At this point, I nearly spilled my coffee. Why?

The fact that the President was reaching out to Robert Wolf for color on developments surrounding the mortgage business. Why might that be funny? As an institution, UBS could not spell mortgage in the early to mid-90s let alone think about properly underwriting and distributing the product.

I was hired in late ’96 by a former Bear Stearns colleague who had recently joined UBS to help develop this business. My tenure and that of my colleagues within our fledgling mortgage effort was short-lived as a result of Swiss Bank’s takeover of UBS. Swiss Bank’s management had no desire to be in the mortgage business. UBS’s management, including Wolf, was not about to spend any political capital to truly defend our business.

Not a big deal truly. I took my francs and moved on.

I write now simply because I find it amazing that our President is getting insights on the mortgage market from an individual at an institution that had no meaningful understanding of the intricacies of the mortgage market.

Great country America.

You can’t make this stuff up.

LD

  • divvytrader

    he fired the mortgage unit at UBS so he could bring on the ex-Kidder mbs gurus at Paine Webber he was sure could do better but instead watched them lose billions by warehousing huge amounts of subprime/Alt-A dog doo ……. his business acumen backing Obama will end in similar fashion .

    • ARS

      Who ran sales for Mr. Wolf? David Shulman a buddy of his from Penn.

      What was Mr. Shulman involved in? You guessed it. Dumping Auction-rate securities. Read this MonkeyBusiness Blog post from mid-2008.

      June 27, 2008

      David Shulman Come on Down!! You’re Next on Celebrity Perp Walk!
      Remember yesterday we talked about how some of the big banks, Like UBS, were pushing municipal and student loan agency auction rate debt onto retail (mom and pop) investors as they saw the institutional market for the product vanishing in late 2007? Most of the investors didn’t seem to know that the liquidity of their new investment relied on an auction process, that was sort of a scam to begin with. They thought it was AAA, good as cash. It wasn’t.

      Well today most financial pages are reporting that UBS is being sued by the State of Massachusetts for fraud. The suit says they misled clients with regard to the liquidity and quality of the auction rate debt. William Galvin, secretary of the Commonwealth of Massachusetts, is quoted in the NY Times:

      “The thing that is most amazing to me is what a comprehensive and deliberate strategy this was by UBS. They wanted to reduce their inventory, so they decided to gear up their sales campaign using cashlike arguments deliberately.”

      Galvin is on to the sham auctions the banks ran on these instruments for years, taking down issues that weren’t bid on to make it look like real auction. This in turn gave the instruments a false appearance of high liquidity.

      Anyway, the complaint has identified David Shulman, the Head of UBS Fixed Income Global Sales, as the main culprit in aiming these inappropriate retail trades at mom and pop. They’ve got emails that Mr. Shulman sent out to the global sales force in mid-December. Here is a quote from the email, “We need to move this paper and have to explore all angles possible. We need to do this as quickly as possible. Please work on this as a priority.” At the same time UBS was warning issuers that the market for their debt was seizing up.

      Now there was one “retail” investor who sold his auction rate debt securities. Dave Shulman! According to the NY Times, Shulman had been selling them all through late 2007. He sold the last chunk December 12, 2007, one day after he sent out the “SELL MORTIMOR SELL” memo! According to the Times:

      “In testimony before Massachusetts investigators, Mr. Shulman said that his ‘risk tolerance’ drove him to sell. He said he replaced the securities with issues that were more liquid and seemed to offer ‘more protection’, according to the complaint.”

      • LD

        The twists and turns on the landscape keep getting more and more interesting.

        What would Barack think about his confidante’s sales manager front running the ARS market?

  • LD

    I won’t get into the personal but to be honest UBS (Swiss Bank) actually went without a mortgage business for a year or two between the Swiss Bank takeover of UBS and then the merged bank’s purchase of Paine Webber, (which had the Kidder contingent).

    There was a gap in there.

    UBS’ mortgage efforts in the early to mid 90s were unmitigated disasters. Then the prop group, known as Dillon Read, and UBS’ mortgage desk both lost their proverbial shirts in this past meltdown.

    In regards to the relationship between RW and BO? I would venture to say it is probably equal parts politics and business going both ways.

    • divvytrader

      you can bet Wolfie was ripping his hair out as UBS mortgage group blew sky high after they acquired Paine Webber …. i can picture him screaming ” i ALWAYS hate mortgages ” .

      methinks the fold-in of Paine Webber was already part of the master plan and having zero conflicts with any existing mortgage folks would make it cleaner / smoother .

      amazing the way that it was Swiss Bank acquiring UBS ( to make that humongous loss by the UBS derivs desk disappear from public disclosure since it would now just be part of Swiss bank ) …….. but then UBS management managed to kill off all the Swiss Bank management and take control of the merged entity !

  • hongloan

    UBS – where there’s absolutely nothing standing between U and the BS

  • Doyle Fan

    President Obama, Bernanke, and Jim Cramer are in a MOVIE about hedge funds called “Stock Shock.” Even though the movie mostly focuses on Sirius XM stock being naked-short-sold to near bankruptcy (5 cents/share), I liked it because it exposes the dark side of Wall Street and reveals some of their secrets. DVD is everywhere but cheaper at http://www.stockshockmovie.com

  • archie grany

    It is amazing that Obama gets and takes any advise from Wolf. Look at the performance and ethics of UBS. The worst in every category. UBS wants access to the President and Wolf wants to be a King Maker. Wolf gets paid for not showing up for work. What a life. PS: Shulman will get off with a slap on the wrist. If Madoff donated money to Obama he would to.






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