As Dave Kranzler discussed in our latest episode of Shadow of Truth (SoT), one of his subscribers was privilege to a meeting happening in Washington DC that was centered around Deutsche Bank. The person was approached by someone in the group traveling to DC as if he was a member of the group. Now we learn there are “discreet meetings” taking place in Washington DC regarding Deutsche Bank.
Admitting also that, as has been widely known, Germany would not let DB sink, Reuters adds that “officials recognise that Germany’s biggest bank, which employs around 100,000 people, cannot be allowed to fail.”
However, there is a time constrain as the resolution of the crisis through a prompt – and reduced – settlement is crucial for Chancellor Angela Merkel, who faces a federal election next year. It could be “political poison” for her government to rescue a bank that got into trouble through speculating. Which is why Berlin has been hoping that the US will endorse a near-term settlement, somewhere well below the original $14 billion ask.
While most of that is known, one of the sources said that the ideal solution for Germany in the longer term would be a merger between Deutsche and its smaller domestic rival Commerzbank, “even if it would be better to wait several years until both banks were cleaned up before sealing such a deal.”
Berlin has previously declined to comment on the topic of bank mergers. The official’s comments about an all-German tie-up mirror the view of others in Berlin who spoke to Reuters on condition of anonymity, although it is unclear whether they represent official policy in the Chancellery. “We are not Austria,” the official said. “We are the biggest economy in the European Union, one of the world’s leading exporters. We need a big bank with a European and international presence but which is anchored here in Germany.”
Another option is merging Deutsche with a European rival, but “only if Germans controlled the combined entity.”
As was noted during our SoT show the people of Germany would not stand for a “bail-out” nor would they accept a “bail-in”. This is one of the problems in allowing these banks to become gigantic behemoths that have the peoples wealth, the flow of commerce and investments tied up under one roof. If there is a problem, and there is little doubt DB has a massive problem, the impact on the overall economy and peoples lives is enormous. Will there be protests, a bank run or will the people of Germany and any depositor any where in the world have to sit idly by while DB is in fact bailed in/bailed out?
“The German government would face stiff opposition if it decided to help Deutsche Bank,” said Joerg Rocholl, president of the ESMT business school in Berlin and member of an economic advisory board to the German finance ministry. “I would expect opposition parties to seize on this in a massive way to question the credibility of the government in the run-up to the federal election next year,” he added.
The German public is likewise against a rescue: in an Emnid survey for Focus magazine on Saturday, 69 percent of those polled opposed state aid for the bank, with 24 percent in favour. Lawmakers in Merkel’s Christian Democrats (CDU) have said they do not want to see the government jump to Deutsche’s aid.
“Deutsche Bank caused these problems itself,” said Eckhard Rehberg, a budget expert in the CDU parliamentary party. “At the present time, I rule out capital assistance.”
There is just one small problem: Deutsche Bank holds over half a trillion euros in deposits on its balance sheet, which means that if push comes to shove, Germans will be begging for a bailout just to have access to their savings.
The lesson to be learned here is this – if anyone is still conducting business with any bank of any size good luck. If we continue using banks, other than a utility to pay bills, and move funds for payment, then we will get exactly what we deserve – broke and destitute. It has been made abundantly clear, beginning in 2008, these crooks can not be trusted to do the right thing, ever. Will Deutsche Bank blow apart or will central banks around the world have to print up another batch of double digit trillions to paper over the latest gambling venture gone bad?