It’s not Brexit but “Deutsche-it” you want to worry about

While everyone is endlessly told about the world-ending dangers of Brexit, I wonder if we should be paying a little more attention to “Deutsche-it”.  If the UK leaves the EU the EU will survive.  But what happens when – and surely it’s no longer if – but when Deutsche Bank, Germany’s biggest and only truly global bank has to be rescued? What will the fallout from that be?

I am sure the German authorities will claim its not a rescue its a merger. Yeah right!  It’s a rescue. Deutsche Bank’s shares have fallen 48% in just the last 12 months – the same time the management said they were going to have the bank turned around. The bank’s shares are now worth no more than they were nearly 40 years ago. Which is not such good news.

But there’s worse. While, and perhaps in part because(?) Deutsche Bank’s share price has been in free-fall,  Deutsche Bank has been money laundering around the world. That corruption is now beginning to catch up with the bottom line that it had been pumping cash into for so long. Deutsche Bank is being investigated after the Panama papers revealed its roll in industrial scale tax avoidance and money laundering. No sooner had the ink dried on that headline when the revelations about Deutsche Bank’s central role in laundering money through Danske bank drew yet more investigators to its HQ like flies to a fresh and steaming turd.

Now don’t get me wrong I’m not saying this makes Deutsche Bank special among big banks except in the category of being caught. There, they have certainly wrestled the crown from Citi and Wachovia.

What I am saying is that that much laundering in that many localities is going to mean the usual bankers defence of ‘one bad apple’, ‘one corrupt employee’, ‘one weakness in our otherwise impeccable rules which are now being updated etc etc’ is not going to wash (sorry I couldn’t resist) so easily.  Deutsche Bank is a dirty bank. But does this mean Deutsche Bank could be brought up on corporate criminal charges? Not a chance. To do that could mean it would lose its banking license and that would be “Deutsche-it”. And “Deutsche-it” would be far more dangerous to the EU as a whole than Brexit. Deutsche Bank is a filthy, systemically dirty bank but a bank which the German state is going to save. Using tax payers money. But how?

Of course every nation has such a bank, we certainly do here in the UK. But it is full of irony that the self-proclaimed capital of fiscal prudence is going to be intervening to save its flag-carrying bank and not just save it but do so in a way that makes a mockery of all the fine words about lessening systemic risk and tackling the problem of Too Big To Fail Banks.  Surely we all now have to admit that all that fine talk was just so much political smoke blown up our collective rear ends?

By merging Deutsche Bank with Commerzbank, which is itself one of the global Banking-Dead, being still part owned by the German tax payer – much like our own moaning, shuffling, dribbling RBS, the German ‘regulator’ will be creating an even larger corpse.  Of course old habits are hard to kick and the German answer to every failing bank it has ever had, has been to merge it with another. They did it way back in the 90’s when they  created HVB from two failing Bavarian banks and again with Hypo and Depfa  just before the crash. It never works for them but they keep on trying. To be fair, so does every other financial regulator in every other country. Maybe they are all related?

Anyway, it will surely happen and what it will create does make political if not economic sense. At the moment Deutsche Bank is a G-SIFI, A Globally – Systemically Important Financial Institution. Every self respecting nation wants to have one. Deutsche Bank is Germany’s.  The other, unofficial name for G-SIFI’s is TBTF. Except, and here’s the rub, there is and always has been a little gap between those two concepts, that has niggled away at bankers and their political friends all these long years of the wonderful recovery we have been having.

And that gap is that being a G-SIFI, being on the official G-SIFI list, actually, legally means you can fail but are so important you have to fail in a special way. You have to have a special ‘Last Will and Testament’ in case of your untimely demise. It means there are special rules you are bound by concerning your capital holdings and how you are supposedly going to be – should you fail – wound up in a special way that protects the rest of us from your implosion.  It doesn’t mean you are Too Big To Fail.

The idea was that our wonderful and prudent rulers and regulators would create new rules to prevent banks failing (which sounds a little like TBTF, but isn’t) but IF they did fail then they would be wound up in a way that protected the rest of us. The problem is that’s not what the bankers want at all and certainly not what the countries who house those banks want. What nation wants its largest bank to fail, ever? What would happen to Italy if UniCredit imploded? What would happen to Spain if Santander died? Or the UK if HSBC was ever really caught out like Deutsche bank has been?

The answer is no one knows and no one is prepared to find out. The G-SIFI bank wind-up rules are there because in the teeth of the political fall-out from the bank crisis our rulers had to be seen to do something. But no G-SIFI bank and no nation housing one is ever really going to allow a G-SIFI to go down. ‘G-SIFI’ is what we have officially but unofficially what the world of finance is sticking to is TBTF. Just, Too Big to Ever, Ever be allowed to Fail …no matter what. The question is how to be TBTF while officially merely being G-SIFI? And the answer, straightforwardly I suppose, is to make G-SIFI’s bigger. So big that failing really isn’t a viable, survivable event – at least no politically.  Which means merge Deutsche Bank with Commerzbank, either of which could just conceivably be wound up,  and create something so sprawlingly immense that it just is TBTF.

That makes sense doesn’t it? Could Germany ever allow Deutsche Bank and Commerzbank to fail at the same time? No, of course not.

Personally I don’t think the German state was ever going to allow Deutsche Bank to go down. The flag carrying bank is a very different animal to the flag carrying airline. One can go the other can’t. Combining Deutsche Bank with Commerzbank closes that risky gap between being systemically important and being truly too big to fail.

Brexit can conceivably happen – though if it does and a general election returns a Corbyn government afterwards, then I think we will see engineered ‘regime change’ of the kind that we are used to allowing our rulers to impose upon Ukrainians, Iraqis, Libyans and Syrians, being imported into the heart of the Industrial North. Brexit and then Regime Change in the UK? Yes.  But Deutsche-it? No, not a possibility.

If I’m right then expect other nations to follow suit and when the next crisis hits we’ll see the creation of the truly TBTF mega banks.

 

30 thoughts on “It’s not Brexit but “Deutsche-it” you want to worry about”

  1. Welcome back, worth waiting for in a really scary way David.
    Lets get you on Steemit and the distributed web.

    When the history of the next great pogrom ( already underway in Fascist Macrons Belle Francais) is written they will say,

    “First They came for the Bloggers”

    https://steemit.com/@tonefreqhz

    https://www.youtube.com/watch?v=4UmdaMzXCkA
    https://steemit.com/deutsche/@tonefreqhz/first-they-came-for-the-bloggers-deutshiesser-bank-tbtf-g-sifi-a-globally-systemically-important-financial-institution

    Please comment on the original here

  2. Jonathan Sugarman

    David,

    Please stop putting the pieces of the puzzle together. According to Friday’s FT, there are more than ONE THOUSAND employees at DeutscheBank making more than One MILLION Euro a year. They are so good at what they do, that their return on equity is 0.4% (yes, zero point four).

    1. thanks for that. one thousand making over one million driving a giant corporation directly into a state treasury. damn that venezuelan socialism.

  3. I was reading some time last year that Deutsche bank’s IT is in a terrible mess. I don’t pretend to know much about it, but the gist seems to be that it is based on Cobol & to upgrade the system would be a nightmare & extremely expensive. This situation was given more credence by those commenting, who do know what they are talking about, some of whom who had worked for DB in IT. I can’t help wondering whether there will be a problem along the lines of last years TSB fiasco when these zombies get it on.

    If not, then as David as already described Europe is full of corporate zombies, Germany has gone into a technical recession ( whatever that is ) their deplorables are it seems getting more uppity. The Donald might launch a financial attack due to the Iran Swift situation, their rejection of the F-35’s, possible take up of Nord Stream & apparently infrastucture is in a mess, particularly Rhine bridges.

    Meanwhile those pesky Italians keep talking about unmentionables :

    https://wolfstreet.com/2019/02/03/italy-glass-steagall-type-law-to-break-up-banks-cut-bailout-costs-for-taxpayers/

  4. A Corbyn government can happily be regime changed as far as I am concerned. His Labour party and some of its associated unions (teaching and social work, in particular) is responsible for facilitating then covering up literally millions of racially and religiously motivated crimes against the native working class: whether it be the mass rape of over 200,000 white girls from Newcastle to Bristol, Rotherham to Oxford and every town in between, or the tens of thousands of gang attacks on white and non-Muslim men in and around Islamic ghettos which have led to at least seven racist murders – Labour and its fellow travellers in academia, the National Union of Journalists and the so called ‘anti-racist’ organisations (themselves tied to the globalist deep state) are responsible for crimes which were they reversed and covered up by the Tories would see mass protests, riots and the nation shamed before the entire world.

    Indeed such is the scale of the cover up these last thirty years (and perhaps longer), it is impossible to have any kind of honest, rational conversation about race relations in Britain so upside-down is the truth.

    Were Corbyn to get in – a man who we should remember was happy to take money from the Iranian government (Press TV) which imprisons and tortures female dissidents while being best friends with the Irish Republicans who planted bombs at cenotaphs and on English high streets – we would simply see a tightening of the politically correct authoritarianism which has made a traditionally freedom loving nation fearful of speaking its mind at the same time as taxing everyone outside the 1% to death in order to make good on its various promises.

    The man is a morally bankrupt fraud.

  5. There’s also zero desire among the public to have another General Election. Ordinary people outside the world of increasingly polarizing world of political obsessives are tired of politics.

  6. By that measure, Deutsche Bank, Europe’s second-largest bank, and one of the world’s ten largest banks by assets, is in big and serious trouble. And this matters: It’s been singled out by the International Monetary Fund as “the most important net contributor to systemic risks” to the global financial system. If Deutsche Bank wobbles, the rest of the global financial system will shake.

    https://www.michellhilton.com/2019/02/o-deutsche-bank-esta-uma-bagunca-terrivel.html

    1. If the German Economy and credit creation was, as described by Frau Merkel, run like a Swabian Hausfraus kitchen, then Germany would be in some difficulty with the insolvency of Deutchshe Bank .
      However Merkels understanding of economics and money creation is insufficient to operate a Currywurst Cabin.
      The problem of insolvent banks with large toxic assets on its ledger has already been successfully treated by Ben Bernanke of the US Fed. He simply created the credit to buy up all non performing bank assets and parked them at the Fed.
      Central Banks can create credit at will and even buying assets at large discounts can still show a profit. The policy is known as Credit Easing.
      It is estimated that the Fed created approx. $16 trillion to salvage US banks, with some banking consolidation and allowing Lehman Bros to collapse as a lesson.
      The problem with Deutsche Bank and its exposure to trillions worth of derivatives has been known since 2008.
      As an aside ,Deutsche Bank is the chosen depository of the Norwegian Sovereign oil Fund.

      The ECB has the capacity to buy all of Deutsche Banks toxic assets and allow Deutsche to continue trading with little effect on the German Economy and no call on German taxpayers for a bail-out. Its what Central Banks are supposed to do.
      However the ECB/EU has other agendas, and we have seen them in play when they forced Ireland to bail out its Banks and unsecured bondholders with Euro 69 billion and foisted the cost on Irish taxpayers.
      This is Mafia style extortion practice. Subsequently Ireland has had an economic recession, housing crisis, evictions. austerity, fire-sale of property assets to US Vulture Funds and open border migration. All with the complicity of the Irish Govt.
      Germany’s Real economy is not overly dependent on Deutsche Bank. The German economic miracle is largely due to its 1500 non-profit small community banks, creating 80% of the credit in Germanys economy.. They support local SME’s which make up the majority of its hi-tech export sector and is Germanys largest employer.
      Germany has recently had a property/real estate boom. and this is now collapsing, leaving the usual negative equity bones behind it.
      Same old story ,the Vulture Funds will descend and pick the carcass at fire sale prices.

      The Deutsche Bank bail-out will be a negotiating leverage tactic between the Bundesbank and the ECB, concessions will be made and one of those has possibly already been granted. That is the inexplicable Open Borders migration policy, unilaterly decided by Merkel .This has created social chaos in the EU countries affected.
      It is noticeable that those countries who refused are mainly those with their own Sovereign currencies.

      We will not be allowed to know the details of the Deutsche Bank bail-out, because it may breach EU treaties and will be disguised and obfuscated.
      But for sure,Germany .who thought it was Top Dog in the EU will be shown who is the Real Power.
      The EU/ECB is a dark and dangerous institution with hidden agendas, that are not beneficial to citizens.

      1. I wish I could Counter you but I can’t. I see little or no good coming from Brexit under Tory rule, yet I see little or no good coming from Remaining either. TiSA CETA and the Japanese trade agreements are a new offensive against what little remains of our democracy. We have had two years to marshal our thoughts and plans for defending our children from Globalisation and neoliberal technocracy and have wasted them.

        1. English Outsider

          ” We have had two years to marshal our thoughts and plans for defending our children from Globalisation and neoliberal technocracy and have wasted them.”

          Yes.

          Seeing this over a year later – it’s still “Yes”.

          1. Hello English Outsider.

            Thank you for all three of your comments and the valuable links. I hope very much you will comment again. I suspect I would learn a great deal.

  7. Under full reserve banking (backed by several Nobel laureate economists) it’s plain impossible for banks to fail. Plus under full reserve, private banks can no longer print / create money, which as several leading economists have pointed out, amounts to counterfeiting.

    1. Private banks do not create money. They create Credit on the strength of the Borrowers signed loan agreement , which becomes a tradeable financial security. All orchestrated by the Central Banking System.
      The issue of coins and cash is only allowable to a Sovereign State, and only consists of 3% of available credit.
      The approaching cashless society will remove all Govt power and cede total power to the Central Banking Money Powers. Serfdom is our future..

    2. Whether you prefer Full Reserve banking, Positive Money’s plan or MMT all agree that our present fractional reserve, fiat-money private bank money creation scheme is broken and serve the interest of no one beyond those who control those banks. Good to hear from you Ralph Musgrave.

  8. If you can’t crash them, then break them up into little pieces and tell them to sink or swim.
    Lock in all their over-compensated staff on the threat of calling in the past 10 years of their over-payments, and drop all €million salaries to a tolerable level.

    Jail the top echelons, and don’t bail out the bond-holders.

    All seems very simple, but who is there in any position of authority capable of even thinking of action?

  9. Golem,

    The question is will they be able to bail out Deutsche Bank?, I don’t think they can, derivatives.come to mind, so does the word “trillions”.

Leave a Comment

Your email address will not be published.