Friday, September 30, 2016

Deutsche Bank Troubles


If you've been following the financial headlines you know what Deutsche Bank is in trouble. The bank poses systemic risks because of its size and interconnectivity. Here is an excerpt from Fortune Magazine focusing on its systemic risk and derivative exposure:
Geoffrey Smith. September 27 2016. 5 Things You Should Know About the Deutsche Bank Train Wreck. Fortune, http://fortune.com/2016/09/27/deutsche-bank/  
Deutsche Is Too Interconnected to Fail: “It’s a counterparty to virtually every major bank in the world, in virtually all asset classes.”

Deutsche Has an Inconceivably Huge Derivatives Portfoli: “Deutsche has the world’s largest so-called derivatives book—its portfolio of financial contracts based on the value of other assets—in the world. It peaked at over $75 trillion, about 20 times German GDP, but had shrunk to around $46 trillion by the end of last year. That’s around
12% of the total notional value of derivatives outstanding worldwide ($384 trillion), according to the Bank for International Settlements.”

Deutsche Bank should have been broken up a long time ago.

In my book Crisis Communication, Liberal Democracy and Ecological Sustainability (here) I explore a few risks posed by the bank's interconnectivity and address concerns about the bank's mode of conduct. Here are some excerpts:


The financial complex is dominated by the most connected and wealthiest (in terms of ownership) private financial entities, including commercial banks (e.g., J. P. Morgan Chase and Deutsche Bank), investment banks (e.g., Goldman Sachs), brokerage and security firms (e.g., Vanguard), and other institutional investors, including hedge and pension funds. Included also in the financial complex are legal infrastructures and nongovernmental and governmental agencies that oversee and regulate operations (such as, the U.S. Securities and Exchange Commission, U.S. Federal Reserve Bank, The International Monetary Fund, the World Bank, and the Bank of International Settlements). Academic knowledge, professional forms of expertise, and cultural practices define the worldview of the complex, delimiting codes of conduct and habits.

The financial complex began market consolidation at the close of the Nineteenth century, a trajectory that extended across the Twentieth century. At the dawn of the Twenty-first century, financial ownership has become even more consolidated, with the most powerful institutional investors in finance owning majority equity shares in the world’s largest transnational corporations across industries. Network research by Vitali, Glattfelder, and Battison[i] identified the following transnational corporations as among the world’s 50 most connected:

1. Barclays plc

2. Capital Group Companies Inc.

3. FMR Corporation

4. AXA

5. State Street Corporation

6. JP Morgan Chase & Co

7. Legal & General Group plc

8. Vanguard Group Inc.

9. UBS AG

10. Merrill Lynch & Co Inc.

11. Wellington Management Co LLP

12. Deutsche Bank AG

Deutsche Bank was established in Germany 1870 as a joint-stock bank by a charter from the Prussian government aimed at expanding overseas trade.[ii]

Deutsche Bank has a poor of financial misconduct and was fined extensively in the wake of the financial crisis. Deutsche Bank was fined by the U.K. Financial Conduct Authority (established 2013), the U.S/ Department of Justice, the U.S. Commodity Futures Trading Commission and New York’s Department of Financial Services and received the most severe penalties, including a £1.7bn fine and a requirement that Deutsche Bank admit criminal guilt.[iii] Deutsche Bank was also required to fire seven senior employees.

Deutsche Bank was singled out because of evidence that its employees pleaded with individuals at Barclays, Citibank, UBS, among other banks, to move benchmarks. Deutsche Bank employees “accidentally destroyed hundreds of tapes of phone calls” and lied to the Financial Conduct Authority when telling the agency that the German financial authority had barred Deutsche Bank from disclosing data. It is unclear whether criminal charges will be levied against actual Deutsche Bank employees.

Deutsche Bank also has a poor environmental record. Financial institutions held responsible in 2012 for most substantial environmental damage included French BNP Paribis, the German Allianz, Deutsche Bank, the Dutch ING and UniCredit.[iv] The report singles out Deutsche Bank and Goldman Sachs for promoting the financialization of basic commodities with sometimes catastrophic costs for everyday people.[v]

Deutsche Bank is heavily invested in uranium trading, as is also the case with Goldman Sachs, selling around 10 million pounds of uranium annually: “the annual amount of uranium the two banks traded is 5 million pounds more than all of Canada produces per year—and Canada is the second-largest uranium producer in the world.”[vi]


Why do we allow risk-seeking financial institutions to continue creating global chaos as a result of their heedless pursuit of profit and disregard for social-environmental consequences?


REFERENCES

[i] Stefania Vitali, James B. Glattfelder, and Stefano Battiston, “The Network of Global Corporate Control,” PLOSone 6 (2011), accessed December 3, 2011, doi: 10.1371/journal.pone.0025995.

[ii] “Deutsche Bank History: Under the Empire 1870 –1918,” Deutsche Bank, https://www.db.com/en/media/Deutsche-Bank-History--Chronicle-from-1870-until-today.pdf.

[iii] James Titcomb, “Deutsche Bank Hit with Largest Libor Fine in History,” The Telegraph, April 23, 2015, accessed September 17, 2015, http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11557026/Deutsche-Bank-record-Libor-settlement.html.

[iv] Ibid., 5.

[v] Ibid., 7.

[vi] Marin Katusa, “The Truth About Goldman Sachs,” Casey Research, February 25, 2014, accessed May 26, 2014, https://www.caseyresearch.com/articles/the-truth-about-goldman-sachs.

11 comments:

  1. Deutsche Bank has nothing to do with germany
    even the name seem so.
    You gave me a good booktip some time ago,
    that I soon start to read, but her is another really good book.
    greetz
    smnt
    https://telltruthshamedevil.blogspot.de/2016/03/ebook-tell-truth-shame-devil.html
    about the chiefcooks
    https://soundcloud.com/smnt/wahrheit-sagen-teufel-jagen-2

    ReplyDelete
  2. I don't agree with the idea that the center of power can be easily traced to people of a particular religion or ethnicity. I believe that the corruption of power afflicts certain individuals within all societies.

    ReplyDelete
    Replies
    1. Following Weber I believe that the institutional form leads to anonymous forms of power, although I agree with Marx that economic incentives drive much decision-making.

      I believe that corrupted institutions select their decision-makers mimetically, although sometimes the pathologies of power seize new territories, colonizing social relations that were previously less centralized and corrupted.

      Delete
    2. That`s right
      "you can`t trace them easily", that is
      part of the game.
      Even that it is unnecessary if you or anyone,
      outside the "invisibles" agrees to any idea,
      it is a fact that the invisibles own the banks,
      which own the industrial military complex
      and the mainstream-press or media.
      There is no doubt about certain or criminal
      individuals in all societys, in the end most people have their price, and if you own the money
      you do rule.
      anonymous forms of power = difficult to trace
      = the invisibles

      Delete
  3. I had already shared this with many people. The smoke and mirror routine will kick in overdrive when deutchebank fails. Our banking and financial structures all built on a series of ponzi schemes and especially nuclear. I was reading that the major nuclear companies in japan like Mitsubishi and Hitachi are consolidating because the govt does not want to give them loans anymore. If the big three nuclear in japan consolidated to make renewables they might have stood a chance.

    ReplyDelete
  4. http://www.zerohedge.com/news/2016-09-29/run-begins-deutsche-bank-hedge-fund-clients-cut-collateral-exposure

    "If the most sophisticated professionals in the world are withdrawing cash, why are German depositors leaving their life savings at risk..."

    ReplyDelete
    Replies
    1. Maybe that is propaganda -- "German depositors leaving their life savings at risk..." If we can not believe political news we surely can not believe financial news.

      Delete
  5. I used to like banks; but that was long ago in a small rural town. The man that headed the bank the I used worked there until he was in his eighties and rode his old bike to work most days. If Trump is elected I hope he will give some consideration to Professor Bill Black who seems to know more about white collar crime and banks than anyone else. John Strumph seems to symbolize quite well contemporary banking. I have an account at Well Fargo myself and also at a credit union. These banks are very clever as they hire nice young people for tellers and bank managers which is very disarming. Nonetheless I occasionally mention to them that I find it interesting that their bank (WF) launders drug money and the like. Cross selling hasn't been tried on me probably because I do not have much money for cross buying! At least now days the banks have practically completely lost the image and feeling of being an extension of Protestant Christianity which they once had. Still not sure what a derivative is and refuse to waste time finding out beyond the fact that they sound like poisonous snakes.

    ReplyDelete
  6. If Trump wins, we are all in trouble. If Hillary wins, we are all in trouble. We are in trouble anyway. Democracy is a failed concept in American national politics. There are a hundred rickety reactors, pumping poison and ready to fail. No one is talking about Fukushima. Sabre rattling with thousands of nuclear weapons continue. The financial house of cards is collapsing. Watch American Greed sometime and, understand that nuclear power, wall street, the bond markets,derivatives are, for the most part, built on a huge and complex series of ponzi schemes.

    ReplyDelete
  7. There are many stranded asserts in america now. Houses in plush areas that may never sell for their hyper - inflated values. The supposed value of houses and rentals have gone up since the 2008 housing crash. This is because there is little worth investing in america since our industry has gone over seas. Wall street has created another house of cards in the rentier economy. Consider that we could become a powerhouse of renewable energy.
    The nefarious computer industry with things like Facebook, produce things of little real value.
    The fed has created a 20 trillion dollar debt for Americans.
    There are Nuclear reactors that were not completed and whose land value and, expensive, partial-constructs are now worth, only pennies on the dollar.
    Housing and other Developments around old rickety reactors .developed area around shut-down abominations, with fuel pools full of nuclear waste like San onofre between San Diego and LA. There are 17 million people nearb to San Onofre and it is very close to a busy freeway. There are Houses around the st Louis burning, radioactive-landfill that could not be worth anywhere near their appraised values. They are st Houses close many other wastes sites.

    " Matters about the Nuclear Industry
    STRANDED NUCLEAR WASTES – theme for October 2016
    FEATURED
    Posted by Christina MacPherson
    You’ve heard of “stranded assets”, for example – things like coal mines that are no longer economic, and the owners can’t sell them.

    That’s bad enough. But what about STRANDED WASTES? This is the horrible reality already going on in America – the land that pioneered the (?) great nuclear power industry. They are already stuck with radioactive trash in its various forms – liquid and solid.

    They’ve even got legislation to try to unravel who’s responsible for the toxic trash – H.R.5632 – Stranded Nuclear Waste Accountability Act of 2016

    The nuclear lobby bravely puts up its latest gimmicky ideas for nuclear reactors that should “eat the wastes” . But even those reactors would still leave highly toxic radioactive trash, and the experiments in nuclear reprocessing are turning out to be super expensive duds, such as Japan’s Monju project.

    Why on earth would we keep on making radioactive trash, in view of this pressing problem?"

    Stranded asserts in the United States that contribute to the overvaluation of true investment values is contributing to the financial unraveling. .

    There is also the illusion of america being a healthy nation. This is becoming less viable with the accumulation of genotoxic toxins in populated areas and elsewhere. In water supplies and food.

    It is all related to the "dust in the wind" that are the genotoxins, that become a part of us. Brings new meaning to the song "Dust in the Wind."

    ReplyDelete
    Replies
    1. Most of what we have will be STRANDED ASSETS, as the financial collapse continues.

      Delete