Deutsche Bank has long been something of a basket case. In 2007, when the first signs of the impending financial crisis began to appear, it was the most highly leveraged bank in Europe, with assets 68 times its Tier 1 capital. It narrowly managed to avoid sovereign bailout in the financial crisis, but it was a principal beneficiary of the US government’s bailout of AIG and it receivedliquidity support from the Fed and the ECB. But its problems weren’t limited to US subprime and toxic derivatives. The Icelandic journalist Sigrún Davíðsdóttir reports that Deutsche Bank had lent extensively to Icelandic banks and was left with the toxic loans when the Icelandic banks failed.
.. Deutsche Bank also turned out to have sizeable interests in Ireland’s teetering banks. When the Irish property market collapsed, the Irish government – partly at the EU’s insistence – bailed out its banks to prevent a chain of contagion spreading out across the Eurozone and risking the solvency of the large European banks such as Deutsche Bank.
.. The ECB’s Securities Markets Program helped Deutsche Bank and others unload their toxic Greek debt (and other dodgy sovereign debt) at better than market rates. Guess who holds it now? Yes, the ECB does – and the ECB is of course backed by taxpayers. Yet another disguised bailout for Deutsche Bank.
.. To me, Deutsche Bank looks very much like the archetypal “too big to fail” zombie bank – draining money from central banks, sovereigns and investors while giving little in the way of returns.
.. Though admittedly it is far from being the only European bank in this condition.