For a long time it's been the banks have it.
What's up now, however, owing greatly to zero interest rates, is banks no longer have it. Banks live off the spread on a normal yield curve. Much of this is over the current Deutsche Bank mess. MSM is trying its best to play down the systemic risk associated with Germany's biggest bank.
zerohedge.com/news/2016-10-02/about-deutsche-settlement-rumor-cryan-hasnt-even-started-negotiations-doj
Owing to an earlier International Monetary Fund release, pointing out that declines in Deutsch Bank shares spilled over to other bank shares, calling is the riskiest global bank with systemic tentacles, the debate gathers momentum. There's something in banking called the counter party relationship. It financial code for confidence and trust. Confidence and trust are critical components any financial system. Just ask the Fed, the BOJ or the ECB.
Enter stage left the greedy U.S. Department of Justice, a agency that never met a fine it wouldn't like to impose and collect. It's this administration's version of 21first Century Smoot-Hawley. The DoJ is seeking $14 billion to settle alleged bad faith mortgage deals. We don't have a figure but this administration's DoJ has collected tons of fines and nobody knows where that money wound up. One should not be surprised if it later turns up some went to a certain foundation.
With Deutsch the fine is three times the expected and only a smidgen less that the current market value of the depressed bank's share prices. But this indirectly reflects the Obama crew's real opinion of business in general. That this story was leaked also, like the current administration, smells
What this proves is nothing happens in a vacuum. Should the DoJ's greed trigger a systemic event you can bet they will deny any and all responsibility. But there's another point to all this, one about the market and investors. As a Financial Times article notes: there's a big question about something called level three assets. What's at sake here is mark to market accounting, something banks traditionally have avoided. In short, is some junk hidden in there somewhere? And if so how much?
These are charges that date to before the 2008 crisis began. For sure, this is a negotiable opening joust. But the intrigue here runs deep. High finance is high finance. And you usually will find the footprint of Goldman Sachs. Deutsche is Germany's only global bank and it has spent years trying to crack that U.S. controlled monopoly. Say hello to GS.
This is a political game as we said, a Smoot-Hawley world, the U.S. regulators versus European ones. Goldman Sachs faced a $15 billion DOJ fine for financial misgivings, but GS was allowed to negotiate theirs in private, paying in the end $5 billion. It pays to have friends in government and, as one hopeful presidential candidate does, just the reverse, friends at GS.
Eight years ago hedge funds withdrew funds from Lehman Brother shortly before the what is now a PC loathed expression, the fat lady sings. Deutsche CEO John Cryan played down the problem and added he has no plan to raise capital. Couple that with Germany's austerity stances over the years and Angela Merkel's declining popularity over an endemic immigration problem and you get some idea how nitty-gritty things can get.
Further trouble ahead as another sovereign--yes we still use the term, Italy--has jumped into the DB fray. German market is closed Monday, but the ADR trades on New York. Let's see how MSM tries to spin this one.
zerohedge.com/news/2016-10-01/deutsche-bank-charged-italy-market-manipulation-creating-false-accounts
yahoo.com/news/german-bank-regulator-warns-negative-perception-spiral-report
Is a government bailout close at hand? Given the current turmoil and the history of Germany's stance on austerity it may have painted itself into a difficult corner.
A year ahead of national elections, German leaders are keen to avoid upsetting voters with a bank bailout - something EU banking rules were designed to prevent.
In July, hardline Finance Minister Wolfgang Schäuble opposed the Italian government rescuing troubled lender Banca Monte dei Paschi di Siena.
"The rules must stick, otherwise what is the use of giving ourselves rules?" he asked
thelocal.de/20160930/6-things-to-know-about-crisis-hit-deutsche-bank
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