Deutsche Bank's $5 Billion Short

The United States Senate has released a scathing bi-partisan report on the origins of the global financial crisis that plunged the US and world economies into the worst recession since the 1930s.  The 650 page report - Wall Street and the Financial Crisis: Anatomy of a Financial Crisis - can be downloaded (warning: pdf) here.  The report in partcular singles out two financial institutions - Goldman Sachs and Deutsche Bank - for reckless, unethical and, in my opinion, criminal activities which disrupted capital markets around the globe and exacerbated the crisis as it unfolded.  The Deutsche Bank "Case Study" can be found on pp. 330 - 374, and makes for fascinating reading.  The Case Study , documented with interviews with the principals and e-mails sent by Deutsche Bank, provides an inside view of the banks CDO (Collateralized Debt Obligation) juggernaut that earned the bank $billions in fees while sticking global investors with high-risk junk securities which quickly became totally worthless.

At the heart of the Case Study is a $5 billion dollar short position Deutsche Bank built against the very securities it was aggressively selling to its institutional client base.  E-mails document how the bank's chief CDO trader - Greg Lippmann -  convinced Deutsche Bank's senior management to build the short position, even has he called his group's activities "a giant ponzi scheme".  That short position netted Deutsche Bank $1.5 billion in profits, as the subprime market began to tank.  The $5 billion short was so successful that a trader who worked for Deutsche Bank even wrote a song about it. It's called "CDO Oh Baby," and it's set to the Vanilla Ice song.

Is Lippmann sitting in prison together with that other notorious ponzi schemer Bernie Madoff?  Hardly. Greg Lippmann left Deutsche Bank last year to start LibreMax Capital LLC, an investment firm based in New York.

Left out of the report is how Deutsche Bank set up another lucrative business during the crisis - serving as trustee for its own CDOs as well as for Goldman's and others'.  In that line of business, Deutsche Bank has earned $millions in fees by foreclosing on commercial and residential properties in the US - forcing tens of thousands of Americans from their homes.  The bank has used its position as America's Foreclosure King to acquire properties  at fire-sale prices and selling these at a profit to other real estate investors.

But that would be the subject of another investigation. 

Comments

[Strahler 70]

Die Deutsche Bank erpresst neuerlich Justiz und Kommunen. Letzteren hat sie in den vergangenen Jahren sog. Spread Ladder Swaps, Wetten auf die Zinsentwicklung verkauft und der BGH hat nun geurteilt, daß die DB "die Risikostruktur bewußt zu Lasten der Anleger strukturiert" hatte. Wie in Italien, könnte nun auch in Deutschland eine Prozesslawine losgetreten werden. Sollten Schadensersatzforderungen vom BGH für rechtens erklärt werden, dann drohe, so die DB, "eine zweite Finanzkrise". Der BGH ließ sich jedoch nicht beirren...
Man wird nun also wunderbar verfolgen können, wo sich die finanziell knappen Kommunen, die nach der Verfassung gar nicht spekulieren durften, das Geld holen werden, oben oder unten... In Mühlheim weigert sich die Ratsmehrheit aus CDU, SPD und FDP schon mal, die Deutsche Bank zu verklagen.

Derweil setzen BILD und Bildungsfern-Sehen wie RTL ihre Hetzkampagnen gegen sozial Schwache und Minderheiten munter fort. Mögen sich Arbeiter und Arbeitslose selbst zerfleischen, bevor sie gemeinsam auf die Obrigkeit losgehen. Angeschossene Raubtiere sollen ja die gefährlichsten sein, mal sehen, wie die Sache weitergeht.

[Angryspeculator]

too bad ur a pussy and don't understand capitalism. You just think because someone was stupid enough to take the other side of someone's bet that the person who won should go to jail. Thats called being a retard and u should get ur head examined. You also promote Obama here on the side which I think is hilarious since he is the worst fuckn president and a complete uneducated moron.