The Financial Times reported late this week on the failure of Deutsche Bank to recognize $12bn of paper losses on complex derivative transactions during the financial crisis. The bank’s objective was to avoid a bailout by the German government.
The bank may have avoided a bailout by the German government but, as information later obtained by Bloomberg and a team led by Phil Kuntz revealed, hundreds of banks, including Deutsche Bank, borrowed billions from the US Federal Reserve and various programs during this period.
The argument pushed by some columnists, and the bank itself, is that “all’s well that ends well” and the end justifies the means. Deutsche Bank survived without a German bailout and that’s a good thing. The global financial system was saved and investor confidence was maintained.
Let’s “den Mist hinter sich bringen“.
Deutsche Bank was in debt to the Fed for 439 days. At the peak, November 6, 2008, it owed $66 billion. Average daily borrowing was $12.5 billion.
If investors had known at the time what Bloomberg found recently, and only via years of litigation over Freedom of Information Act requests, they may not have believed the bank’s no-bailout propaganda.
The allegations against Deutsche Bank were made by three former bank employees as whistleblowers to the US Securities and Exchange Commission.