Over the last week, media analysts and commentators have been sounding the alarm over the financial position of Deutsche Bank, the third-largest bank in the EU economy and 11th largest bank in the world.
Deutsche Bank’s shares plunged to record lows this week, sparking talk of a government bailout to avert a new financial crash. The turmoil surrounding Germany’s biggest bank demonstrates that all of the contradictions of the global financial system that led to the meltdown of 2008 are once again erupting. Now, however, these contradictions are fuelling and intersecting with economic and political tensions between the major powers. These geo-political conflicts are, in turn, intensifying the financial crisis.
The financial position of Deutsche Bank has been of concern for a number of years, with the International Monetary Fund saying last June that it appeared to be “the most important net contributor to systemic risks in the global financial system.”
It appears for German Chancellor Angela Merkel, that ‘what goes around comes around’ after the German crushing of the Greek economy last year. Now, it appears, the boot is on the US’ foot, and they are lining up a significant kick in the pants for Ms Merkel and the German government. The point of contention? Allegedly, corrupt trading practises by Deutsche Bank (DB) regarding the sub-prime mortgage market that contributed to significant problems with the US economy during the 2008/09 global financial crisis. The US Department of Justice announced a $14 billion fine of DB as punitive measures for the company’s criminal behaviour, but the bank claims that they should be able to settle, like other banks have previously, for much less than the declared amount.
Seemingly conf[i]rming the rumor, Agence France Press reports that Deutsche Bank is nearing a $5.4 billion settlement with the US Justice Department. This has catalyzed another leg higher in Deutsche Bank stock and lifted the whole market [this occurred on Friday, last stock-trading day for the week]
Anyone who has been paying any kind of serious attention to what has been happening in world financial markets over the last twenty years knows that the entire system is a complete cesspit of corruption, graft, and outright theft, with regulatory bodies like the US DOJ issuing only token fines and punishments in their role as PR managers for the banks’ outright looting of the population’s wealth & assets. As the real economy has continued to decline however, less and less profits are being extracted from the public despite the greed of the psychopathic banking cabals growing ever-more expansive.
That greed has resulted in large-scale treaty frameworks such as the TPP and TTIP – treaties designed to strip away sovereign rights of member countries and translate that reduced sovereignty into increased profits for transnational corporations (primarily US ones) for the foreseeable future. Unfortunately, despite their psychopathic Trojan-horse members of various governments, the implementation of these two treaties appears to have stalled – most notably the TTIP in Europe, where the German Deputy Chancellor recently publicly stated:
“Negotiations with the United States have de facto failed, because we, as Europeans, must not bow to American demands,” Gabriel said according to an excerpt of an interview with the German public broadcaster ZDF.
The French Prime Minister, Manuel Valls, expressed similar sentiments back in late June:
France’s Prime Minister Manuel Valls has dismissed the possibility of an agreement on the US-EU transatlantic trade deal, since it goes against the interests of the European Union.
“No free trade agreement should be concluded if it does not respect EU interests. Europe should be firm. France will be vigilant about this,” Valls said addressing members of the governing Socialist Party on Sunday, AFP reported.
“I can tell you frankly, there cannot be a transatlantic treaty agreement. This agreement is not on track,” Valls added.
So now, with the TTIP looking virtually dead & cremated, and the anglo-American empire’s conquest projects faltering in Syria & the rest of the Middle East, the political and economic ‘elite’ of the US appears to have decided that it was time to send a message to German government to ‘get onboard’ with the imperial treaty arrangements, lest they get any ideas about ‘pivoting’ towards any of their more regional economic trading partners, let’s say, Russia.
The US DOJ declared fine for DB, $14 billion, is actually more than the bank’s capital assets – meaning that DB might literally not be able to pay such a fine without going bankrupt.
Media and market actors immediately began speculation about a ‘bailout’ of the bank by the German government, but Angela Merkel has allegedly denied any such possibility. Since then, DB shares have taken a massive slide over the last week, with good analysis by market-watchers Tyler Durden, Michael Snyder and Max Keiser:
Meanwhile, several large hedge funds have pulled billions of dollars in assets from the bank. A number also are betting the stock will fall, known as short bets. Those that have disclosed short positions include Marshall Wace LLP, Discovery Capital Management LLC and Highfields Capital Management LP, according to filings.
Marshall Wace first declared a short position in Deutsche Bank in February. By Tuesday, it had doubled its bet, although this was cut back Thursday. Discovery first disclosed a position at the start of August and increased it late that month, while Highfields first disclosed a position in July, which it quickly increased.
AQR Capital Management LLC, which has $159 billion in assets, disclosed that it had a short position in Deutsche Bank on Wednesday, according to a filing made public by the German regulator on Thursday. AQR also was among a number of funds that have recently taken steps to withdraw securities or cash from the bank, or dial back their trading activities, the Journal reported Thursday.
Hedge funds’ bets against the troubled German lender have been cranked up in recent days, according to the filings, although they are still below levels hit earlier this summer.
Commentary on social media platform Twitter regarding the bank has been trending upwards, with the hashtag #DeutscheBank getting significant discussion. With some of that discussion revolving around a possible “bail-in” of the bank (a bail-in is where a bank unilaterally seizes some of its depositors’ funds in order to remain viable), and public interest in the issue building, the bank now risks a serious run on its depositors’ assets – those providing the underlying capital for the bank to be able to function at all.
DB will be protected to some extent by the fact that Monday is a bank holiday in Germany, so depositors will be unable to make significant withdrawals of assets, but this could work against it also, in that more time is available for the information about the parlous state of the bank to become public – heightening the ability of DB customers to become aware enough to do what they should have already done some time ago – get their assets out.
With rumours and false rumours of a potential settlement with the US DOJ going around (AFP reported a false story that claimed the settlement would actually be around $5.4 billion), new information has just emerged detailing six current and former DB managers charged in Italy over falsifying the accounts of Italy’s third-largest bank, Monte Paschi.
Just as importantly, the firms are also named as defendants in the indictment, as the Italian law provides for a direct liability of legal entities for certain crimes committed by their representatives. Which means even more legal charges, fines and settlements are looking likely in DB’s future.
Although it is unlikely that this latest criminal prosecution was coordinated with Washington, it seems that the US pathocracy is sending a message to the German government, daring them to a ‘game of chicken’ where the US can potentially bankrupt DB, or not, depending on whether Germany signals it will move forward with implementing the TTIP, or not. Such a signal would likely consist of the Germans providing a state-sponsored bailout for DB, in direct contradiction to their stated principles and past positions on bailouts – most notably and visibly with regard to the Greek government last year.
Presumably, if the German govt ‘eats sufficient crow’ and shows the US empire that they are willing to go against the overwhelming public support they have on the issue and do their bidding, the US DOJ will then magnanimously provide a light ‘tap on the wrist’ (not even a ‘slap’) to DB by massively reducing the amount of their fine. This will no doubt preserve DB (and the European markets) in the immediate short term, but cause increased financial hardship to Europe by further delaying and worsening the eventually-inevitable results of decades-(even centuries-) long financial mismanagement.
With other world markets open for business as usual on Monday, the pressure will no doubt continue to increase on DB until either the German govt caves in to the US, or DB fails, causing what could become a systemic crash of the Western (read: anglo-American) financial system. The ‘Greek Chorus’ of the Western financial media is already beginning to display a unanimous narrative in recommending that Germany must bail out DB.
The question is: Does Ms Merkel have the leadership capability and strength of will to do what she has overwhelming public support to do – face down the terrorist anglo-US empire threatening to bring down the majority of Europe’s economy if it does not get its way regarding the undemocratic and freedom-gutting TTIP?
We can only hope so. The next week promises to be extremely enlightening.