Deutsche Bank: the next financial crisis is here and the lenders need €150 billion from taxpayers

Deutsche Bank Towers – View of the entrance. Headquarters in Frankfurt am Main. (Deutsche Bank Audiovisual Services).

Deutsche Bank Towers – View of the entrance. Headquarters in Frankfurt am Main. (Deutsche Bank Audiovisual Services).

Last Monday David Folkerts-Landau, the chief economist of Deutsche Bank, the ailing largest lender of Germany, in an interview with the prestigious newspaper ‘Die Welt’ stated that European banks must be subsidized with €150 billion in rescue money to recapitalize. Obviously, it will be the taxpayers to once more provide the capital the euro area banks need. He explained that there is no chance the banks to find that money from private investors, given the sorry state of their market evaluation.

He also had the impertinence to point a finger to the Italian banks, avoiding however to mention that his employer, the Deutsche Bank is in a much worse position risk-wise than any Italian bank. Everybody knows that Deutsche sits uncomfortably on risky CDSs and derivatives amounting to tens of times the GDP of its home market (some tens of trillions of euros), while the Italian banks are troubled by non performing loans of around €300 billion.

It’s always the taxpayers

He went on by implying that the European taxpayers are obliged to once more rescue the usurping and imprudent bankers. “We have to set up a big fund to recapitalize the banks” he said, shamelessly forgetting that the European governments and the central bank had to inject a round sum of €4 trillion to save the lenders during the crisis years of 2008 – 2010.

He also forgot to point out that Greece, Ireland, Spain, Holland, Belgium, Germany, Britain and other EU member states risked their own creditworthiness or even became insolvent in order to rescue their banks. The most tragic example is Ireland, a country with impeccable fiscal accounts and only 20% of GDP in public debt until the crisis broke out in 2008. All of a sudden though, the unfortunate Irish taxpayers were obliged to borrow almost an entire GDP in order to rescue the failed four private banks of their country (Anglo-Irish Bank, Allied Irish Bank, Nationwide Building Society and Bank of Ireland). The same is true for Greece, but this country suffered also from a catastrophic fiscal and public debt management.

Subsidizing the bankers again

In any case Ireland, Greece, Spain and up to some degree Portugal too had to take refuge in traumatic borrowing, in order to repay their banks’ debts to major German and French lenders. According to the Statistical and Social Inquiry Society of Ireland (The Funding of the Irish Domestic Banking System During the Boom), the German financial institutions were the largest investors in Irish bank bonds in the pre-crisis period. Prominent amongst the imprudent German ‘investors’ who had lent hundreds of billions to south European and Irish banks was Deutsche Bank and one or two major French lenders.

Unlike similar cases, as in the settlement of the Latin American debt to New York banks in the 1980s, the European southerners repaid their north European lenders at full nominal values. On the contrary, the dollar denominated Brady Bonds (named after the then U.S. Treasury Secretary Nicholas Brady, who proposed a debt-reduction agreement for developing countries) with which the Latin American countries repaid the New York lenders, incorporated a generous forgiveness of a large part of nominal debts. In this way the final settlement in the Americas recognized a shared responsibility for the borrower and the lender, in relation to the reasons the debts went off beam.

The European Shylocks

But no, the north European Shylocks didn’t accept any responsibility for the south European and the Irish debt crisis. The German minister of Finance Wolfgang Schäuble and Jean-Claude Trichet the then President of the European Central Bank in 2010, actually blackmailed the southerners and Ireland and forced them to repay all debts at nominal value. No negotiations whatsoever took place over this issue, on the pretext that the global banking system was on the brink of collapse.

It seems then that Folkerts-Landau has not forgotten what Trichet and Schäuble did some years ago and wants to imitate them. He once more brandishes the terror of a new financial meltdown in order for us taxpayers to hand out to his employer and to other usurping bankers another multibillion package in aid money. He actually elucidated that when he said “We are witnessing one crisis after another and I can, by no stretch of imagination, see any growth prospects anywhere”. He speaks of a crisis in general, again concealing the fact that it was his bank and others like it, which drove the world to this impossible state, with the financial crisis having settled in as a standard feature of the economic scenery.

It’s the banks stupid

If it wasn’t for the banks, the real economy recession would have troubled the society with a bit more unemployment and less incomes, but it wouldn’t have driven the economy to financial fallout and total chaos. The bankers actually are not lenders any more. They have become ‘investors’, risking our money for their own personal interest. If their bets go well they pocket the profits and the bonuses. In case of a failure they present the bill to the public exchequer and demand a rescue, terrorizing the real economy with the threat of total destruction. They have done this after our legislators allowed them to create all those monstrous derivatives and swaps markets, betting on everything with anything they don’t own.

This is a straight forward rocket endangering the entire society. At the end of the day, there is no other way to deal with the bankers, than the public prosecutor hunting them down and bringing them to court for extortion, fraud and terrorism. It’s not then by chance that the first to come out and demand €150 billion is the chief economist of the Deutsche Bank. It’s his employer who has shown the greatest insatiable appetite for risk, having now accumulated an explosive pile of precarious bets in the CDSs and the derivatives markets. That’s why the Deutsche Bank is in deep trouble and has the largest needs for recapitalization in relation to the other big Eurozone banks. The problem of the Italian lenders is nothing compared to that, because they are not exposed to the grey banking universe.

The truth remains though that as things stand now, the next financial crisis is not around the corner, it has already set in. Folkerts-Landau demands €150 billion in order to save us from chaos, but this kind of massive subsidy is easier said than realized. Governments and taxpayers would not concede to that, unless a new financial Armageddon knocks on the door.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Featured Stings

Brexit: when the hubris of one man can set the UK, the EU and the entire world on fire

Happens now in Brussels: Green Week sets the EU and global climate policy agenda

Why Eurozone can afford spending for growth

Irish Presidency: Not a euro more for EU budgets

Bundesbank’s President Weidmann criticises France and the EU. Credibility at risk?

COP21 Breaking News_07 December: “The world is expecting more from you than half-measures”, UN Secretary General Bank Ki-moon cries out from Paris

Brussels wins game and match in Ukraine no matter the electoral results

Tackling youth unemployment through the eyes of a European entrepreneur

Eurozone plans return to growth

Can the next financial crisis be avoided?

Cédric in India

Draghi keeps the euro cheap, helps debt refinancing, recapitalization of banks and growth

EU: 13 major banks may pay fines 10% of worldwide turnover

Scotland and First Minister Salmond enter the most challenging battlefield for independence: Europe

Sanctions on Russia to be the biggest unity test at this European Council

EU to gain the most from the agreement with Iran

The EU Commission is lying to the “Right2Water” campaign

Campaign kicks off with High-level Event on #FairInternships

Cloud computing under scrutiny in the EU?

Ukraine: turning challenges into opportunities


Look Mom, even the House of Lords says the #righttobeforgotten is not right

A very good morning in European markets

Eurozone closer to a deflation – stagnation trap

A Sting Exclusive: EU Commissioner Mimica looks at how the private sector can better deliver for international development

Recession: the best argument for growth

Me and China

JADE visits Lithuanian Junior Initiatives

Migration crisis update: lack of solidarity not only among EU leaders but also EU officials

France pushes UK to stay and Germany to pay

Germany to help China in trade disputes with Brussels

The creative technology and its advancements

The Eurogroup offered a cold reception to IMF’s director for Europe

Apparently the EU Digital Single Market passes necessarily from China’s Digital Silk Road

Do you dare to go to China?

Tsipras doesn’t seem to have learned his “almost Grexit” lesson and Greece faces again financial and political dead end

EU to spend €135.5 billion in 2014 or 6.5% less than this year

Will the end of QE come along with ECB’s inflation target?

“Who do I call if I want to call Europe?” Finally a name and a number to answer Henry Kissinger’s question

Berlin repels proposal for cheaper euro

EU citizens disenchanted with Economic and Monetary Union over rising poverty and high unemployment

Dutch voters reject EU-Ukraine partnership and open a new pandora’s box for the EU

On Youth Education: “Just a normal day in the life of a medical student”

Fighting for minds of youth in Latvia

European banking stress tests 2014: A more adverse approach for a shorter banking sector

Intel @ MWC14: Our Love Story with Mobile – Transforming Wireless Networks

WEF Davos 2016 LIVE: “There is a communication issue (about China) which markets don’t like” Christine Lagarde, Managing Director of IMF stresses from Davos

Back to the basics for the EU: Investment equals Growth

Global Citizen-Volunteer Internships

The completion of the European Banking Union attracts billions of new capital for Eurozone banks

Regional policies slowed down by EU bureaucracy

Warmongers ready to chew what is left of social protection spending

Commission threatens Chinese firms with trade penalties

Is there a drug for every disease?

EU agrees on Ukraine – Georgia visa-free travel amid veto risks and populist fears

Eurozone: Even good statistics mean deeper recession

Facebook and Google to treat Europe as the 51st State of the USA

JADE Spring Meeting 2015: a step forward for Youth Entrepreneurship

Draghi left alone with no hope of boosting EU growth as Merkel just focuses on next elections

Turkey to let EU alone struggle with the migrant crisis while enhancing its economic ties with Russia instead?

Hollande protects the euro from the attacks of extremists

More Stings?

Trackbacks

  1. […] Consequently there will be a banking crisis across the continent. [Interestingly even so the Deutsche Bank is also ignoring their situation trying to blame the Italian banks and give financial advice to everyone […]

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s