I haven't read Michael Lewis' new bestseller on the financial meltdown - The Big Short: Inside the Doomsday Machine - but Wirtschaftswoche relates this conversation from the book which took place between a hedge fund manager and a trader at Deutsche Bank, Greg Lippmann:
„Wer ist auf der anderen Seite?“, fragte er Lippmann, „wer ist der Idiot?“ Die Antwort des Deutsche-Bank-Händlers: „Düsseldorf. Dumme Deutsche. Die nehmen die Ratingagenturen ernst. Die glauben an die Regeln“.
("Who is on the other side?, he asked Lippmann, "who is the idiot?" The Deutsche Bank trader answered: "Duesseldorf. Stupid Germans. They take the rating agencies seriously. They believe in the rules.")
What Lippmann was boasting about was selling toxic mortgage securities to IKB Bank in Duesseldorf. It was a super deal for Lippmann and DB. Deutsche earned a hefty sales sommission by unloading the junk and at the same purchased Credit Default insurance from AIG. The bank then watched the toxic securities implode, taking down its good customer - IKB Bank. As IKB ran into severe liquidity difficulties, Deutsche Bank pulled its line of credit from IKB, forcing the bank into insolvency. The German taxpayers bailed out IKB with more than $12 billion in funds, while the US taxpayers made good on Deutsche Bank's contract with AIG, putting $billions in the German bank's coffers.
Yes, it was a splendid deal, and Deutsche Bank's CEO Joe Ackermann was in high spirits as he testified in a Duesseldorf courtroom today:
Deutsche Bank AG Chief Executive Officer Josef Ackermann told a Dusseldorf court that the lender wasn’t responsible for the 2007 funding crisis that forced IKB Deutsche Industriebank AG to seek a bailout.
Ackermann testified that IKB’s capital base was in peril before Deutsche Bank cut IKB’s credit line. Ackermann testified today at former IKB Chief Executive Officer Stefan Ortseifen’s trial on charges he misled investors.
Ackermann had nothing to fear, he is the teflon witness. Besides, the judge in the case is same judge who acquitted Ackermann in the Mannesmann bonus scandal case. Now Joe Ackermann can invite Judge Brigitte
Koppenhoefe to the next birthday party that Angela Merkel will arrange in his honor.
From Der Spiegel: Mein Geld, Meine Bank, Meine Krise