I just returned from a trip to New York city, where many of my old friends now work in the financial industry. For the last year or so, I’ve peppered them with lots of questions about the subprime crisis. They all seem to think it is much, much worse than we’re being led to believe. They also all believe it is absurd that the mortgage markets went unregulated for as long as they did, and some of them believe that the bail out of Bear Stearns (the investment bank that took the biggest hit on subprime defaults) set a terrible precedent. The price tag for the bail out will end up being about $40 billion dollars, according to one of them (you can read more about criticism of the bail out here — personally, I have no idea if it was a good thing to do or not).

I’ve also heard it argued that if Bear had fallen, then so would a few other banks heavily invested in subprime. Which makes this especially troubling (from TPM):

…fmr. Sen. Phil Gramm (McCain’s economics advisor) was advising him on his subprime mortgage bailout policy while Gramm was also a registered lobbyist for the Swiss bank UBS.

Now, it’s clear from the report that UBS had some exposure on the subprime front. But I wasn’t aware of the true extent of it. TPM Reader KB sends in articles Businessweek and Forbes that show just how big a player UBS was. Forbes says that UBS is among the banks worst hit by the global credit crisis, particularly in their direct exposure to the US subprime market. According to Forbes, UBS has some $37 billion in write-downs on assets tied to bad US mortgages. In other words, the bank’s very life appears to be on the line in how the US government chooses to handle the matter.

As MSNBC reported, UBS deregistered Gramm as a lobbyist for the company on April 18th, though he continues to serve as a vice chairman of the bank. But that was fully a month after McCain’s speech outlining his own approach to the crisis.

For all John McCain’s talk of being a maverick who doesn’t listen to special interests, he had a lobbyist for a bank that was looking for a federal hand-out as his chief economic adviser. I think that tells everyone all they need to know about whose interests John McCain really serves.