When traditionally stable institutions like Deutsche Bank find themselves in trouble, it’s a signal that the world’s financial system will face big problems down the road, legendary investor Jim Rogers has told RT.
On Monday, the German multinational investment bank –and the world’s 15th largest bank by total assets– started cutting thousands of jobs as part of an $8.3 billion overhaul announced one day earlier. The bank’s workforce is set to be reduced by 18,000 to around 74,000 employees by 2022, as Deutsche Bank scraps its global equities and trading operations.
The move has already impacted the bank’s shares, which started to fall after initial 4 percent gains on Monday.
“The financial system is in trouble and this is just one sign of what is going on. This has happened in previous financial problems in the 1930s or the 1960s or the 1990s,” Rogers said in a phone interview with RT. He explained that central banks around the globe drove interest rates “to crazy levels,” and now we have to pay the price for that.
Deutsche Bank’s major overhaul does not mean it will not survive, according to Rogers. However, the bank will never be the same and “this is serious trouble” for the lender as well as the entire financial system, the investor believes.
Rogers offered a reminder that some stable banks went bust when nobody expected it, as was the case with Lehman Brothers in 2008 or with another old bank, British Northern Rock.
“And it is happening again. If you go to Scandinavia you see some of those banks that have been around for years are in trouble now. This is nothing more than a sign of the times and we’re going to have a lot of problems down the road,” the investor said.
Wall Street banks and the Federal Reserve have good reason to be worried about whether Deutsche Bank’s restructuring plans succeed. Deutsche Bank’s $49 trillion in notional derivative tentacles extend into the mega Wall Street banks. According to a 2016 report from the International Monetary Fund (IMF), Deutsche Bank is heavily interconnected financially to JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley and Bank of America as well as other global banks in Europe. In its in-depth report, the IMF concluded that “Among the G-SIBs, Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse.”
The U.S. taxpayer has even more reason to be outraged that a serially-charged German bank could potentially cause waves in the U.S. financial system. That’s because Deutsche Bank was previously on the receiving end of obscene bailout funds from the U.S. government. When the government bailed out the giant insurer, AIG, in 2008, a good chunk of that money went out the back door to make Deutsche Bank whole on its derivative bets and other dealing with AIG. Deutsche received $2.6 billion in collateral postings for derivatives; another $2.8 billion from Maiden Lane III (a creation of the New York Fed to buy up Collateralized Debt Obligations (CDOs) from AIG); and a whopping $6.4 billion under securities lending agreements Deutsche Bank had with AIG.
In addition, according to the GAO audit report, Deutsche Bank received $354 billion in low-cost revolving loans from the U.S. Federal Reserve during the same period that Citigroup was drinking at the trough. (See After a $354 Billion U.S. Bailout, Germany’s Deutsche Bank Still Has $49 Trillion in Derivatives.)
U.S. regulators should be all over this situation with Deutsche Bank. Instead, just like in the leadup to the 2008 financial collapse, regulators have decided it’s safer for their career prospects on Wall Street to plant their heads firmly in the sand.
Imagine the power—unchecked power, at that—to create money. Then imagine the disaster such power could unleash. While that scenario looms in the foreseeable future, Nomi Prins argues, its precursors have made themselves obvious since 2008. They’re the result of central bank policies and the system that sustains them, institutions absolutely bereft of a Plan B. A mess so manifestly dangerous calls for radical solutions, she maintains.
That’s the perspective of an insider, or at least an ex-insider. A veteran of Lehman Brothers, Bear Stearns and Goldman Sachs, Prins dedicated herself “to exposing the intersections of money and power and deciphering the impact of the relationships between governments and central and private bankers on the citizens of the world.” Six books later came Collusion: How Central Bankers Rigged the World, recently released in paperback.
This is a work of extensive detail, recounting who did what to interest rates, inflation rates, currency valuations and other economic interventions, focusing on quantitative easing and the other euphemisms for her preferred term: “money conjuring.” Collusion also answers a key question: Cui bono?
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