Panic over Deutsche Bank—‘dead bank walking’ According to the 13 August Die Welt newspaper, German Finance Minister Wolfgang Schäuble and the German government are in panic about the fate of Deutsche Bank. Under the headline “The Fears of the Powerful Faced with Deutsche Bank”, the paper reports that “at every political summer party in Berlin, where people from business are there, it’s an issue.” Citing an anonymous member of the government, the articles says that this is probably related to the totally opaque status of Deutsche Bank’s bulging derivatives portfolio. “Schäuble’s people” are terrified that Deutsche Bank could plunge, leading to a plea for Berlin to bail it out. On 7 August prominent German economist Martin Hellwig, director of the Max Planck Institute for Research on Collective Goods, called for Deutsche Bank to be nationalised on an emergency basis—a rare proposal in Germany—declaring that it “is in a worse crisis than in 2008”. It must be nationalised, Hellwig said in an interview with Frankfurter Allgemeine Zeitung, because any attempt to “wind it down”—i.e., to “resolve” the megabank by bailing in bondholders, etc.—would radiate that risk out to the whole banking system. The IMF has already formally found it to be the one giant bank which “radiates more risk” to other banks and banking systems than does any other in the world. “In the last 20 years the investment bankers controlled the bank and sucked it dry”, Hellwig continued. “Nationalisation in an emergency could be a step towards more rationality in the banking world.” Express UK, which reported Hellwig’s call on 10 August, also cited financial expert Max Keiser calling Deutsche Bank a “Ponzi scheme” that needs to be put out of business. “It’s dead, it’s insolvent, the bank is dead … This is a dead bank walking”, he said. Following the European Banking Authority’s 29 July stress test, an independent investigation by three economists revealed the EBA’s results as a fake (AAS 10 August). The Mannheim-based Centre for European Economic Research, where one of those three economists, Prof. Sascha Steffen, is based, has quantified the impact of a crisis on Deutsche Bank using US Fed stress test standards. Deutsche Bank was reported as being in a very precarious situation, with a capital “hole” bigger than its entire market capitalisation. In a really big crisis (sic), the bank would need an extra €19 billion of capital input, whereas the bank’s total market value is only €17 billion and shrinking. Deutsche Bank rejected the research centre’s assessment, claiming that the official stress test showed that the bank was solid. The daily Süddeutsche Zeitung of 10 August picked up on the study, with an article titled “The nationalisation of Deutsche Bank is more and more probable”. It quotes Dieter Hein from independent consultancy Fairesearch, who says: “The bank produces billions in losses but nevertheless pays billions in bonuses. It increases its dependency on investment banking through the planned sale of Postbank, but investment banking is not profitable and is highly risky. The bank strategy has failed completely.” Ultimately, shareholders should intervene, but they prefer to leave the ship and sell their shares. “It becomes more and more probable that Deutsche Bank won’t succeed in a shift. The scenario of a nationalisation is more and more probable”, Hein says. While Deutsche Bank has until now proclaimed its solidity, according to Express of 16 August it admits it is operating in “’financial repression mode’ as it desperately scrambles to implement financial buffers to prevent collapse”. The paper reports that the bank’s profits dropped by 98 per cent last month! Deutsche Bank’s head of interest rates research, Dominic Konstam, has released a paper warning that a “collapse in risk assets” could cause “panic”; and according to leaked reports, a strategy to shift away from the “universal” banking model has been discussed inside the bank, under the codename “Project Jade”. According to Money Manager magazine, if the proposal were accepted the bank would split into two parts, a capital market unit and a private and corporate unit. As Schiller Institute Chairwoman Helga Zepp-LaRouche has emphasised, Deutsche Bank must be saved—but the Deutsche Bank of CEO Alfred Herrhausen, who was assassinated on 30 November 1989 just after the fall of the Berlin Wall, and not the Deutsche Bank of today, run by London and Wall Street. A reorganised Deutsche Bank, cleansed of the changes made after Herrhausen’s assassination, will be necessary to join a competent German government—minus Chancellor Merkel and Finance Minister Schäuble—in issuing government-backed credits to join with Russia, China, and India in the great Eurasian New Silk Road projects.
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