Germans in “discrete” talks with US on Deutsche

Ah, yes, to be too big to fail. Late breaking from Reuters:

The German government is pursuing discreet talks with U.S. authorities to help Deutsche Bank (DBKGn.DE) secure a swift settlement over the sale of toxic mortgage bonds, according to sources in Berlin.

Until now, German officials have played down their role in the standoff, saying it is up to Deutsche to work out a deal with the U.S. Department of Justice (DOJ), which is demanding up to $14 billion to settle claims the lender mis-sold mortgage-backed securities before the financial crisis.

But government officials in Berlin, speaking on condition of anonymity, told Reuters they hoped to facilitate a quick deal that would buy Deutsche Bank time to regain its footing.

One senior government official told Reuters there was “contact at all levels” between German and American officials.

…The resolution of the crisis through a 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. At the same time, officials recognise that Germany’s biggest bank, which employs around 100,000 people, cannot be allowed to fail.

…The first government official said the ideal solution for Germany in the longer term would be a merger between Deutsche and its smaller domestic rival Commerzbank (CBKG.DE), even if it would be better to wait several years until both banks were cleaned up before sealing such a deal.

…”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.”

…The official added that merging Deutsche with a European rival was fine in principle but only if Germans controlled the combined entity.

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Comments

  1. casewithscience

    How did Deutsche not learn from the GFC? They keep on expanding financialisation deals on the basis of underlying assets that have failed in the past. The 50-80s conception of everyone paying the mortgage just doesn’t work in a world where wages are stagnating. If wages don’t inflate then there is high likelihood of mortgage default.

    Stop betting on houses for god’s sake and treat them like any other risky arrangement!!!

    • True.

      Let the Chinese (with money) purchase houses or insist on a realistic LVR for everyone else.

      Eg 75% LVR for the hoi polloi

      • flyingfoxMEMBER

        Chinese (with money)

        Herein lies the root of the problem. Chinese credit expansion and balance sheets make DB’s look sane.

      • +1 FF. Something in the realm of 50% of all new money “printed” worldwide since 2008 is actually Chinese.

      • Jumping jack flash

        Interesting Tony,
        I was wondering about this the other day.

        I guess they needed to print a ton during the currency war too.

      • flyingfoxMEMBER

        I guess they needed to print a ton during the currency war too.
        No need to print when banks can create money out of thin air, much of which flows out into western RE.

        Edit: @Tony. 1) I suspect the proportion is actually higher and 2) pretty much all the Chinese money is mobile and not in bonds sitting on bank balance sheets having little material impact on the real economy.

    • The problem with The Golem is that you have to keep feeding him.

      The conjures that brought this abomination to life had no concern for anything other than their own will to power. Now the world is being devoured. No wonder the same kind is talking about leaving the planet.

    • “houses” and “risky” in the same sentence?

      I’ve got to report to reusa of your treason!!!

    • They did learn. They learnt that they are too big to fail and so can take any risks they want and will be bailed out when trouble arises. Isn’t that what is happening?

    • Very interesting LNL with a Marx expert. Karl might prove to be right, albeit 170 years too soon.

  2. This too big to fail bollocks makes me angry. Just let it sink or nothing will be learnt. No wonder people are voting for fringe parties. Free market for everyone until the big players fail…

    • Give yourself to the Moron Side. It is the only way you can save your sanity.

      You have anger. You have hate. But you don’t use them.

    • St JacquesMEMBER

      Listen to dumpling’s deep wisdom, but keep a sharp eye out for the Revolution.
      Then we”ll see if they’re too big too fail.

    • I was a bit disappointed the occupy wall street movement died out, but push the needle a little harder against the poor and they will be coming for the 1% with pitch forks.

  3. YES! PROP UP THE DEAD TREE!

    The saplings do not need light to grow! They just need to try harder! Those lazy Gen XYZs complaining about a lack of light and nutrients! In our day we had to grow under a government provided lamp in a pot! None of this natural, land and secondhand light you kids get today! Loooxury!!

  4. Fixing a political dilemma 101:

    1) Germany slip a couple of billions to the US,
    2) US DoJ drops their fine a couple of billions.

    Hey presto! Deutsche saved and Germany can claim they obeyed the rules Single Resolution Mechanism because they didn’t formally bail out Deutsche.

    And as a nice aside, the EU will think twice about fining US companies billions of dollars again.

    • Think Apple… and there is the VW fine coming in the wings too!

      Moreover, two US IB’s got bigger fines than DB, And they paid…