Germany’s largest bank appears in danger, sending stock markets worldwide on a wild ride. Yet the biggest source of worry is less about its finances than a vast tangle of unknowns — not least, whether Europe can muster the will to mount a rescue in the event of an emergency.
In short, fears that Europe lacks the cohesion to avoid a financial crisis may be enhancing the threat of one.
The immediate source of alarm is the health of Deutsche Bank, whose vast and sprawling operations are entangled with the fates of investment houses from Tokyo to London to New York.
Deutsche is staring at a multibillion-dollar fine from the Justice Department for its enthusiastic participation in Wall Street’s festival of toxic mortgage products in the years leading up to financial crisis of 2008. Given Deutsche’s myriad other troubles — a role in the manipulation of a financial benchmark, claims of trades that violated Russian sanctions and a generalized sense of confusion about its mission — the American pursuit of a stiff penalty comes at an inopportune time.
It heightens the sense that Deutsche — whose shares have lost more than half their value this year — needs to secure additional investment, lest it leave itself vulnerable to some new crisis.
Thankfully I have no debt
This is why engineers design cars like Mercedes & Porsche and not accountants…
Deutsche Bank shares bounce back sharply as chief hits out
Executives and regulators rally round Germany’s largest lender
https://www.ft.com/content/9d3a1f72-86dc-11e6-bcfc-debbef66f80e
Hans-Walter Peters, president of the Association of German Banks, dismissed the pressure on Deutsche Bank. “The current turmoil in the equity markets is based primarily, as far as I can judge, on speculative assumptions and not on facts,” he said
“That short-term operators like hedge funds, in particular, react to speculation and cause prices to change is not unusual and should not be blown out of proportion. In any event, the price movements have no influence on day-to-day business.”
Mr Cryan on Friday also addressed the issue of the DoJ settlement over Deutsche Bank’s mis-selling of mortgage-backed securities, pointing out that rivals had reached far lower settlements in the past.
“Even the uncertainty over the outcome of our legal process in the US is not a reason for the pressure on our share price, if we take the settlements of our peers as a benchmark,” he wrote in his memo.
Excluding one-off costs, the bank had made a pre-tax profit of €1.7bn in the first half of the year, he added, drawing attention to the strength of Deutsche’s liquidity reserves, which stand at €215bn.
While Deutsche has said it does not expect to pay a figure anywhere near the $14bn demanded, the DoJ is pushing to agree a trio of settlements ahead of the US election in November.
….
While there is no doubt Deutsche Bank had some 2008 mortgage back overhang taking a 14.7 billion dollar penalty down to 5.4 billion is a palpable difference…so we’ll have to wait and see how it plays out.
Cheers
Hans Rupprecht, Commander in Chief
1st Saint Nicolaas Army
Army Group ‘True North’
Maybe they should get their global warming doomsday clock out of Times Square. That would save them a few bucks. Don’t know if it is still there, but it was a few years ago.
It’s a damn “good” thing honesty is in such short supply where it matters most.
Wasn’t the US’s fine against DB exactly the same amount as the EU’s fine against Apple?
August – http://fortune.com/2016/08/31/apple-eu-tax-fine/
Septemenber – https://www.theguardian.com/business/2016/sep/16/deutsche-bank-14bn-dollar-fine-doj-q-and-a
Things that make you go “Hmmmmmm….”
@ RN / It’s bad precedent followed by grossly unoriginal thinking.
I’m now a Santelli fan.
He fell short of calling out all Keynesian b.s. but reached sufficient levels of exasperation to start a movement. Perhaps we’ll get the opportunity to Flush Yellen. Perhaps someone will get around to illustrating what Bush is really to blame for.
@ RN / It’s bad precedent followed by grossly unoriginal thinking.
I’m now a Santelli fan.
He fell short of calling out all Keynesian b.s. but reached sufficient levels of exasperation to start a movement. Perhaps we’ll get the opportunity to Flush Yellen. Perhaps someone will get around to illustrating what Bush is really to blame for.
Maybe Obama can simply funnel some more pallets of CASH to Iran using Deutsche Bank ? Paying the bank a massive fee for the transaction ? After all, Obama is doing everything possible to prop-up the EU … and the Ayahtollahs
If DBank goes down a contagion could occur. Lehman dissappeard and they might to.
It will come with big consequences in Europe.
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