Amidst Deepening Banking Crisis, Deutsche Bank
Loudly Denies Reports of a Government Bailout
Sept. 28, 2016 (EIRNS)—Over the past 36 hours, both top officers of Deutsche Bank and German government officials have loudly denied that a bailout or rescue plan for the bank is in the works —reflecting growing fears that an impending "Lehman moment" for the bank is not far off.
"Whether or not Deutsche can survive without a bailout by the German government is the only topic most other European bankers want to discuss,"
wrote the Telegraph’s business editor, James Quinn, today. RT reported, "Deutsche Bank woes stoking fears of 2008 financial crisis repeat." Wolf Street headlined its coverage, "EU Banking Mayhem, one bank at a time, and then all at once," pointing to Deutsche Bank’s and Commerzebank’s troubles, warning that
"the banking crisis has the potential to transmogrify into a financial crisis. All it takes is for one of the big ones to suddenly topple."
On Sept. 27, Bild Zeitung interviewed Deutsche Bank’s CEO John Cryan, who emphatically denied having asked Chancellor Angela Merkel for a bailout, and declaring that "state aid is not an issue." Accepting government support is out of the question for us, Cryan insisted, asserting that the bank is not having a problem raising new capital. Overall, he said, it has fewer risks on the books than previously and is comfortably equipped with free liquidity. Free liquidity from whom?
Cryan’s remarks didn’t put the issue to rest, however. This morning, the daily Die Zeit, citing unnamed officials in Berlin, Brussels, and Frankfurt, reported that the German government was crafting a rescue plan for the bank, prepared to buy up a 25% stake in the bank "in a worst-case scenario." The plan would reportedly be implemented should the bank require additional capital to resolve its legal disputes with the U.S. Department of Justice, which has fined it $14 billion for selling toxic mortgage-backed securities, and which, in any case, it cannot pay.
According to MarketWatch today, the government plan indicates the bank will be able to sell assets to other lenders, "possibly with a state guarantee." The latest asset selloff was of Abbey Life to the London-based insurance consolidator Phoenix for 935 million pounds.
In a press conference today, Finance Ministry spokesman Martin Jaeger stated that "the German government is not preparing a rescue plan, and there is no reason for such speculation." He wouldn’t comment, however, on whether there had been any meetings to discuss the situation at Deutsche Bank.