Dave Emory’s entire lifetime of work is available on a flash drive that can be obtained here.  (The flash drive includes the anti-fascist books available on this site.)
Joseph Goebbels, Hitler’s propaganda chief, once said : ‘In 50 years’ time nobody will think of nation states.’
COMMENT: In the wake of the shock waves and anxiety coursing through the investment and business community after the “troika’s” capricious handling of the Cyprus banking crisis, it is important to understand that German banks are anything but blameless  in the European financial crisis.
Although the vast majority of Germans aren’t aware of this (due to the selective coverage of the eurozone crisis by their media), German banks are two and a half times as leveraged as their U.S. and British counterparts. German banks have been said to have “poured the drinks” for the party that troubled Southern European economies held.
In fact, the bailouts are being used to shore up leveraged German banks .
Examination of the practices of Deutsche Bank leading up to, and during, the financial meltdown are instructive.
Inextricably linked with the Underground Reich, Deutsche Bank was the financial institution of choice for Reichsleiter Martin Bormann’s personal services. (Supposedly killed in the closing days of the war, Bormann not only escaped but presided over the flight capital program that made the Federal Republic the economic power that it is today. Germany continues to cling to the fiction that Bormann is dead, much as the United States clings fervently to its national political mythology–Lee Harvard Oswald was a lone nut who killed President Kennedy and other convenient, institutionalized fictions.)
In assessing the German claim to achieving banking superiority, a number of things should be borne in mind with regard to Deutsche Bank:
- Represented as financially healthy by its management, Deutsche Bank was actually deeply compromised by its portfolio of bad investments made during the lead up to the Wall Street collapse. This was deliberately hidden by the bank’s chief Josef Ackermann.
- Deutsche Bank had to borrow billions of dollars from the U.S. federal reserve in 2007 in order remain solvent.
- In addition, 12 billion dollars went from the Federal Reserve to Deutshe Bank as part of the AIG bailout.
- The U.S. government filed suit against Deutsche Bank, claiming that it deliberately “gamed” the mortgage market.
- The enormity and significance of Deutsche Bank’s indebtedness can be measured against the volume of the bad trades at J.P. Morgan. Here, we quote the vigilant “Pterrafractyl”: To try and put the scope of the charges against Deutsche Bank into relative context, consider JP Morgan’s “London Whale” blunder of last year. That now single-digit multibillion dollar loss by a bank as big as JP Morgan (now $6.2 billion) was considered a REALLY BIG deal. And this was a $6.2 billion loss in a $150+ billion fund . And this loss took place when there was apparently asset price manipulation taking place too . Compare that to the new Deutsche Bank investigation, where we have $12 billion in losses that were allegedly avoided by mispricing ~$130 billion in derivatives. So if a $6 billion loss was a really big deal for JP Morgan, this latest case has to be considered a really, really big loss that was getting covered by Deutsche Bank. Amusingly, $12 billion is also the amount Deutsche Bank received from the US bailout of AIG . Figures.
As the self-righteous pronouncements about Cyprus, Greece and the other troubled eurozone countries issue forth from German politicians and bankers, it is important to remember how the Federal Republic’s largest bank behaved.
One should remember that the crisis benefits Germany, with a weak euro stimulating German exports and the financial instability in Europe driving capital into German financial instruments and institutions because of their perceived safety.
EXCERPT: . . . The [FBI] file revealed that he had been banking under his own name from his office in Germany in Deutsche Bank of Buenos Aires since 1941; that he held one joint account with the Argentinian dictator Juan Peron, and on August 4, 5 and 14, 1967, had written checks on demand accounts in first National City Bank (Overseas Division) of New York, The Chase Manhattan Bank, and Manufacturers Hanover Trust Co., all cleared through Deutsche Bank of Buenos Aires. . . .
EXCERPT: Germany’s attempts to manage the financial crisis in Europe to their benefit, by regulating every single financial product/bank/action, and claiming their banking superiority as a reason and example, is looking more and more like a sick joke...
Josef Ackermann was bullish. Even as the global financial industry was reeling, the Deutsche Bank chief executive began 2009 by boldly declaring that his bank had plenty of capital and would return to profit that year.
In an investor call that February, Mr Ackermann said he would provide “as much clarity as we can on all the positions” to refute the suggestion that banks such as his had “hidden losses, and one day that will pop up, and then ... we need more capital and the only way to go – to ask for capital – is to see the governments”.
During the public relations campaign waged by Deutsche, its share price recovered from €16 in January to €39 at the end of April 2009, when it reported pre-tax profit of €1.8bn for the first quarter.
But three of the bank’s former employees say the show of strength was based on a fiction. In a series of complaints to US regulators, two risk managers and one trader have told officials that Deutsche had in effect hidden billions of dollars of losses.
“By doing so, the bank was able to maintain its carefully crafted image that it was weathering the crisis better than its competitors, many of which required government bailouts and experienced significant deterioration in their stock prices,” says Jordan Thomas, a former US Securities and Exchange Commission enforcement lawyer, who represents Eric Ben-Artzi, one of the complainants.
Also unknown to the public until now is the assistance – entirely proper – provided to Deutsche by billionaire investor Warren Buffett’s Berkshire Hathaway group.
In complaints to the SEC made in 2010-11, the employees allege that the main source of overstatement was in a $130 bn portfolio of “leveraged super senior” trades.
In 2005 these were seen as the next big thing in the rapidly evolving world of credit derivatives. They were designed to behave like the most senior tranche of a typical collateralised debt obligation, where assets such as mortgages or credit default swaps are pooled to give investors varying degrees of risk exposure.
Deutsche became the biggest operator in this market, which involved banks buying insurance against the possibility of default by some of the safest companies.
Working with Deutsche, investors – many of them Canadian pension funds in search of yield – sold insurance to the bank, posting a small amount of collateral. In return, they received a stream of income from Deutsche as an insurance premium. On a typical deal with a notional value of $1bn, the investors would post just $100m in collateral – a fraction of what would normally be posted by an investor writing an insurance contract.
The small amount of collateral did not matter, the product’s creators said. The chance of several safe companies, such as Dow Chemical or Walmart, all going bankrupt at the same time was infinitesimally small. It might require a nuclear war. The chance of the investors having to pay out on the insurance appeared impossibly remote. The chance of their collateral being used up was inconsequential.
Having bought protection from Canadian investors, Deutsche went out and sold protection to other investors in the US via the benchmark credit index known as CDX. It would earn a spread of a few basis points between the two positions, perhaps 0.03 per cent.
That does not sound like much. But as it amassed ever greater positions, eventually representing 65 per cent of all leveraged super senior trades, it accumulated a portfolio of $130bn in notional value. Over the seven-year life of the trade, the few basis points were worth about $270m.
There was a problem, though, which traders either did not foresee or did not care about when they booked hundreds of millions of dollars of upfront profits. A severe financial shock, well short of nuclear warfare, could also produce disastrous results. . . .
. . . . “If Lehman Brothers didn’t have to mark its books for six months it might still be in business,” says one of the men. “And if Deutsche had marked its books it might have been in the same position as Lehman.”
EXCERPT: In August 2007, as world financial markets were seizing up, domestic and foreign banks began lining up for cash from the Federal Reserve Bank of New York.
That Aug. 20, Commerzbank of Germany borrowed $350 million at the Fed’s discount window. Two days later, Citigroup, JPMorgan Chase, Bank of America and the Wachovia Corporation each received $500 million. As collateral for all these loans, the banks put up a total of $213 billion in asset-backed securities, commercial loans and residential mortgages, including second liens.
Thus began the bank run that set off the financial crisis of 2008. But unlike other bank runs, this one was invisible to most Americans.
Until last week, that is, when the Fed pulled back the curtain. Responding to a court ruling, it made public thousands of pages of confidential lending documents from the crisis.
The data dump arose from a lawsuit initiated by Mark Pittman, a reporter at Bloomberg News, who died in November 2009. Upon receiving his request for details on the central bank’s lending, the Fed argued that the public had no right to know. The courts disagreed.
The Fed documents, like much of the information about the crisis that has been pried out of reluctant government agencies, reveal what was going on behind the scenes as the financial storm gathered. For instance, they show how dire the banking crisis was becoming during the summer of 2007. Washington policy makers, meanwhile, were saying that the subprime crisis would subside with little impact on the broad economy and that world markets were highly liquid. . . .
. . . . Within about a month’s time, however, foreign banks began thronging to the Fed’s discount window — its mechanism for short-term lending to banks. Over four days in late August and early September, foreign institutions, through their New York branches, received a total of almost $1.7 billion in Fed loans.
As the global run progressed, banks increased their borrowings, the documents show. For example, on Sept. 12, 2007, Citibank drove up to the New York Fed’s window. It extracted $3.375 billion of cash in exchange for $23 billion worth of assets, including commercial mortgage-backed securities, residential mortgages and commercial loans. . . .
. . . . Perhaps the biggest revelation in the Fed documents is the extent to which the central bank was willing to lend to foreign institutions. On Nov. 8, 2007, Deutsche Bank took out a $2.4 billion overnight loan secured by $4 billion in collateral. And on Dec. 5, 2007, Calyon of France borrowed $2 billion, providing $16 billion in collateral. . . .
EXCERPT: Amid rising pressure from Congress and taxpayers, the American International Group on Sunday released the names of dozens of financial institutions that benefited from the Federal Reserve’s decision last fall to save the giant insurer from collapse with a huge rescue loan.
Financial companies that received multibillion-dollar payments owed by A.I.G. include Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion).
Big foreign banks also received large sums from the rescue, including Société Générale of France and Deutsche Bank of Germany, which each received nearly $12 billion; Barclays of Britain ($8.5 billion); and UBS of Switzerland ($5 billion). . . .
EXCERPT: The federal government is seeking more than $1 billion from Deutsche Bank in a fraud lawsuit that could open a new front in a campaign to punish companies that churned out the low-quality mortgages blamed for sparking the financial crisis.
The lawsuit filed Tuesday in Manhattan federal court says the German financial giant’s New York-based home lender, MortgageIT, recklessly approved 39,000 mortgages for government insurance from 1999 to 2009 “in blatant disregard” of whether borrowers could make the required monthly payments.
The lender repeatedly lied to the government about the quality of the mortgages and about efforts supposedly undertaken to fix the problems, according to the suit.
“Prudence was trumped by profits and good faith was trumped by good fees,” U.S. Atty. Preet Bharara said at news conference announcing the litigation.
The Federal Housing Administration has paid $386 million in insurance claims on bad MortgageIT loans, a figure the agency projects will rise to about $1.3 billion. The government is asking the court to order Deutsche Bank to pay three times the FHA’s eventual losses on the loans. The suit also seeks punitive damages. . . .