Detroit is the fourth-poorest city in America and the second-most dangerous. The city has feuded with UBS in the past – making the Swiss bank's move into the Motor City even more surprising.
When Michigan's largest city filed for bankruptcy more than four years ago, it became the symbol of America's industrial decline. Every third inhabitant of Detroit, home to auto giants Chrysler, Ford and General Motors, lived below the poverty line, and the homicide rate ranked as the highest in the U.S.
The move by Detroit to file the largest municipal bankruptcy in U.S. history reached all the way to Switzerland: the city had costly interest rate swap agreements with UBS, which the bank refused to cancel.
A lawyer appointed to untangle Detroit's intractable finances ultimately paid UBS and Bank of America $85 million to end the swaps – a victory over the decrepit city which stands in stark contrast to the Swiss bank's core business of catering to the wealthy.
Bygones Are Bygones
Now, the two adversaries are unexpectedly embracing each other: UBS plans to open a brokerage office in the battered heart of the U.S. automotive industry, «Crain’s Detroit Business» reported. The bank plans to rent two buildings in Detroit's downtown, which has experienced a renaissance in the years since the bankruptcy, as wealthy benefactors pouring money into rejuvenation partner with civic projects.
Clearly for UBS as well as Detroit, bygones are bygones. The swaps, tied to worker pensions, had been designed to protect against rising interest rates, but soured when rates fell. This left the city on the hook for millions monthly and unable to provide basic services like street lighting, trash disposal, and emergency services.
In a first step, the Swiss bank will move 14 employees to Detroit, and later plans to gradually increase hiring, the bank said. UBS already has seven brokerage offices in Michigan, primarily in the wealthy outlying areas of Detroit such as Farmington Hills and Birmingham. It is also present in Grand Rapids, the state's second-largest city and home to the ultra-wealthy Devos family, who founded Amway.
