For most of its 146 years, Deutsche Bank was the embodiment of German values: reliable and safe. Now, the once-proud institution is facing the abyss. SPIEGEL tells the story of how Deutsche’s 1990s rush to join the world banking elite paved the way for its own downfall.
.. the collapse of Deutsche Bank is the result of years, decades, of failed leadership, culminating in the complete loss of control of the company by top managers during the period between 1994 and 2012.
It is a story about how Hilmar Kopper, Rolf E. Breuer and Josef Ackermann, the leaders of Deutsche Bank during those fateful years, essentially turned over the bank to a hastily assembled group of Anglo-American investment bankers before Anshu Jain, the prince of these traders, rose to the top and spent three more years sailing the bank full-speed-ahead into the shoals.
It is also a story of how these bank heads, along with numerous other members of the management and supervisory boards, stood aside as Jain and the many other new investment banking heroes modified the staid German financial institution to serve their own purposes — essentially looting it and robbing it of its very soul — without leaving behind a better, stronger bank.
.. Every detail in the sequence of its decline is controversial, partially because the financial world still considers it normal that nobody take responsibility for anything but themselves
.. Their leadership failures were not primarily the result of professional incompetence, since the people involved were and are extremely well educated, often proven professionals with significant amounts of experience. The source of their mistakes lies elsewhere, in cultural factors and psychological disposition.
.. It looks as though Deutsche Bank managers wanted to free themselves from Germany’s reputation for provincialism — and went so overboard the consequences can still be felt today.
.. In a June 1994 meeting at the Deutsche Bank branch in Madrid, Hilmar Kopper, then Deutsche Bank chairman of the board, resolved together with a handful of senior managers to transform the Frankfurt-based concern into a globally operating investment bank. The move was intended to propel the bank upwards, but after a few good years, the slide began — one which continues to this day.
.. In the wake of 1980s “Reaganomics” — named for the US President Ronald Reagan — and the anti-socialist doctrine of British Prime Minister Margaret Thatcher, neoliberalism flourished. For its adherents, neoliberalism was considered a well-founded theory. But its opponents saw it as an erroneous belief in the self-regulating powers of the markets. Nevertheless, neoliberalism entered the mainstream and in Germany too, politicians were eager to deregulate and weaken state oversight.
.. In 1988, Deutsche Bank was the largest player in the German economy. It held large stakes in many, if not all, large corporations in the country: a quarter to a third of Daimler shares; co-owner of Karstadt and Südzucker; a stakeholder in Metallgesellschaft; a major shareholder of the construction firm Holzmann, the Hortmann Group and the porcelain producer Hutschenreuther. The list could go on. The bank’s senior managers and directors also sat on the boards of 400 companies around the country. Without the bank, nothing worked, and standing in opposition to the financial institution was fruitless. Deutsche Bank was Germany, Germany Inc., a small state within the state. Indeed, it was so powerful that many considered it at the time to be a danger to democracy.
.. The bank’s German clients were increasingly discovering the enterprising nature of international financial institutions and Deutsche had to be careful not to be left behind.
.. Those who valued good manners, timeliness and order — and who held the correct, center-right political views — tended to have good careers at the bank.
.. His coworkers admired Mitchell’s competitive nature, his directness and his chutzpah. He was, people said, “aggressive in a positive way,” always wanting to make bets and compete with others.
Kopper hired him and Mitchell brought along 50 of his best coworkers. It was a spectacular move, unheard of for Deutsche Bank, but one that would soon become standard in international banking. Investment bankers know no loyalty. They move in packs to the best hunting grounds — to where the most money can be made.
.. He was, in short, charged with transforming Deutsche Bank into an investment bank.
.. Because he personified the cultural break senior bank managers wanted, Mitchell was polarizing from day one. His direct employees swore eternal loyalty, but those who were not in close contact with him both hated and envied him from a distance.
.. he replied: “I’m God.” Another striking quote attributed to him: “If you don’t have $100 million by the time you’re 40, you’re a failure.”
.. Mitchell and his people felt differently, and saw themselves as “Indians,” as “mercenaries,” as “conquistadors.” They called their boss a “shark” or the “terminator.”
.. And, unnoticeably at first, they also gradually brought disrepute to the entire finance industry and Deutsche Bank, in particular.
.. That is when it started: Disdain began sneaking into the vocabulary of the traders. They treated clients like idiots who could be sold garbage as gold.
.. On Dec. 22, 2000, Edson Mitchell died in a plane crash on his way to celebrate Christmas with his family in Maine. He was just 47 years old.
.. Jain was completely at home in the alphabet soup of derivative abbreviations — CDO, CDS, ABS, RMBS — and his numbers made him to one of the best traders of the era. Deutsche Bank had him to thank for a growing balance sheet and huge profits — and a rise in renown and glamor. The London trading division that Jain led was responsible for a considerable portion of the company’s entire profit.
.. The Basel-based Bank for International Settlements, often referred to as the central bank of central banks, warned against the new tools being used to spread risk. But Jain was unconcerned, as were Financial Times reporters.
.. the former stars of the Deutsche Bank empire, they were no longer valued. Their loan portfolios, still as full as ever, were mocked as antiquated.
Where Does the Hate Come From?
Hatred of refugees is widespread in Germany, but it seems particularly prominent in the eastern half of the country. There are several reasons for that, and many of them stem from life under communism — and unfulfilled expectations afterwards.
the government warned that Eastern Germany’s xenophobia represents a danger to social harmony. No matter where it takes place, xenophobia can be dangerous for its victims, whether in East or West. But the government in Berlin has identified a greater danger in Eastern Germany — one that threatens society as a whole.
.. According to my personal diagnosis, such types of behavior cannot be blamed on the current material situation in which these people find themselves. They are more indicative of a surfeit of emotional tension.
In the East, there is an exhaustion syndrome: Lots of people were forced to dramatically change their lives following 1989. They only briefly experienced reunification as liberation and many now behave less like free citizens and more like released prisoners whose learned demeanor does not correspond to present-day requirements.
.. they are still carrying the baggage of political expectations that today cannot be fulfilled. This includes the demand to be noticed and recognized by those in power — just as they were before.
.. East Germany awarded myriad commendations, from the “badge for best knowledge” to the “order of merit.” Almost everybody had an opportunity to be honored for something at least once a year.
.. The hate is probably also the result of jealousy for the chancellor’s personal devotion to the refugees.. But Merkel? She is considered cold and calculating, yet she showed emotion by embracing refugees. Has she ever done the same to anyone in the East?.. One of East Germany’s legacies is the model of a closed society in which uniformity is more important than diversity. People learned little about interacting with people of different faiths and origins... The communists systematically gave preferential treatment to atheists over Christians and new cities were forced to make do without church towers. As such, it’s hardly surprising that people now feel threatened by the arrival of those who define themselves outwardly by their religion...The AfD has adopted the 1989 slogan “We Are the People” and redirected it against a democratically elected government (one led by a chancellor from East Germany). The slogan “We Are One People” is used as a weapon against those from elsewhere. AfD followers were ecstatic when Merkel, frustrated by rising xenophobia, said “this is no longer my country.” It provided fodder to those who wanted a different Germany — a German Germany.
Worst of the Trumps
Or perhaps with the fact that comparing Syrians to Skittles carries echoes of the Nazi propagandist Julius Streicher comparing Jews to mushrooms in a popular children’s book that posited the ticklish dilemma of how to distinguish poisonous toadstools from edible fungus; and has a mother saying to her son Franz:
“Yes, my child! Just as a single poisonous mushroom can kill a whole family, so a solitary Jew can destroy a whole village, a whole city, even an entire Volk.”
.. The co-founder of Google, co-founder of Tesla, and founder of eBay were all immigrants. Steve Jobs’ biological father was a Syrian immigrant. In fact, earlier this year, the National Foundation for American Policy found that 51 percent of the country’s start-up companies valued at over $1 billion had at least one immigrant founder. A study by the Partnership for a New American Economy, a coalition of governors and business leaders, found that in 2013 more than 40 percent of Fortune 500 companies, including seven of the world’s 10 most valuable brands, were started by immigrants or their children.
.. Trump’s grandfather, Friedrich Trump, was a German immigrant. He arrived in the United States in October 1885. For decades, the family lied: They said he hailed from Sweden. In his book, “The Art of the Deal,” Trump says his grandfather “came here from Sweden as a child.” The family historian, John Walter, explained that Trump’s father, Fred, “had a lot of Jewish tenants and it wasn’t a good thing to be German in those days.”
Where Europe is most and least innovative, in 6 maps
DRESDEN, Germany — Europe has long secretly admired Silicon Valley. So when a local European politician wants to emphasize how innovative his region really is, it is common to somehow relate it to the Valley.
One example is “Silicon Saxony,” in eastern Germany, with the regional capital Dresden. It’s far from being the only European region dreaming of California, though. When a large German company opened its new headquarters in Munich earlier this year, many felt obliged to applaud the “Silicon Valley spirit” one could allegedly feel. What was so remarkable about it?
Although that comparison mostly emphasizes how much Europeans still feel they lag behind the United States in innovating, Munich may indeed come closer than most other cities on the continent,
.. The share of college graduates among the total workforce is only about half of the E.U. average in most German regions.
.. Germany has long prided itself for offering an alternative path for high school graduates besides university. Many companies offer apprenticeships, which are practical and are paid courses for a set amount of time.