Specifically, regulators in Massachusetts have obtained emails showing that UBS was pushing auction rate securities even as it believed that the market was in trouble.

They were aggressively selling these to individual consumers, even while their corporate clients were bailing, because they did not want to be left hold the bag.

It’s called, “putting lipstick on a pig”:

This e-mail was released as part of a civil suit brought against UBS by William Galvin, secretary of the Commonwealth of Massachusetts. He says UBS misled investors by saying that auction-rate securities were as safe as cash in order to keep these arcane bonds off their own books. Among the other e-mails uncovered:

From Joel P. Aresco, chief risk officer for the Americas, Nov. 15: “What measures are being taken to reduce this exposure? [to auction rate securities”

From David Shulman, Dec. 11: “I am pushing every angle here to move product.”

I hope that someone is going to go to jail over this.