A Deutsche Bank Crash Will Make Lehman Brothers Look Like a Joke, Warns Economist

June 20, 2019 (EIRNS)—German economist Marc Friedrich gave an interview to Sputnik Deutschland posted June 18, addressing the elephant in the room in Germany: Deutsche Bank is bankrupt. The decision to take €50 billion long-term derivatives off the balance sheet is “hiding insolvency” and won’t help. If the price for Deutsche Bank shares fall below €5, the German government will step in and nationalize it, Friedrich says.

This will not be easy under EU law, which includes only two proceedings: bail-in or “preemptive recapitalization.” That is why the German government first attempted a merger with Commerzbank, which failed. A third alternative is that someone buys Deutsche Bank for a dime. Besides the national interest that speaks against this, who is going to assume this burden?

Friedrich points his finger to the known off-balance sheet derivatives, which are more than €40 trillion; this is 16 times Germany’s GDP. Market capitalization is now at €12.5 billion. (This is more than level-3 derivatives.) High costs and poor profit margins make the situation unmanageable.

If there is a Deutsche Bank crash, “this could unleash a financial crash which the world has not yet seen. In comparison, Lehman Brothers will be a joke.”

Sputnik Italia and Sputnik France, which posted it June 19, displays it prominently.