As an ex-Deutsche Banker, I was somewhat saddened but not at all surprised to read this in the New York Times:
Deutsche Bank said it would cut as many as 35,000 jobs over the next two years as part of a strategy to overhaul the German lender, Chad Bray reports in DealBook.The plans came after the bank reported a loss of $6.6 billion in the third quarter.The bank said it would close its operations in 10 countries, move its trading operations in Brazil to other hubs and further centralize back-office operations.It also plans to cut its investment banking clients by about 50 percent, especially in ountries with higher operating risk.
The bank said it would cut 9,000 full-time jobs internally, elimate 6,000 external contractor positions and cut an additional 20,000 through selling businesses in the next two years.Deutsche Bank is also edging nearer to settling one of the many government investigations it faces,
I worked at Deutsche Bank in New York and Frankfurt back when it had the ambition to be become the most powerful bank in the world. Alfred Herrhausen was the executive board member responsible for the North American business, and I had the pleasure of meeting this visionary thinker several times. Unlike the heads of the biggest banks today, Herrhausen thought about the bank's role and responsibility in the world. He startled the international banking scene in 1987 when he proposed that global banks forgive their loans to Third World countries. He recognized the risks and opportunities posed by the fall of Berlin Wall, just weeks before his death, and proposed establishing a development bank in Warsaw to bundle incoming aid and deploy it in accordance with strict efficiency criteria. Such an "Institute for Economic Renewal," as he called it, would help channel western aid and monitor its efficient use. Such an Institute could play a constructive role in economic reform. Similar institutions could be established for other countries. Herrhausen engineered the acquisition of the UK merchant bank Morgan Grenfell to bring Anglo-Saxon banking know-how into Deutsche Bank. His plans to bring one of the British executives onto the DB executive board, however, were thwarted, and after his assassination Morgan Grenfell was more or less ruined, the top talent jumped ship.
Deutsche Bank's downfall actually began in 1998 with the purchase of Bankers Trust (BT) in New York. BT had a freewheeling trading culture and was constantly pushing the envelope with new derivative products that had questionable risk profiles. BT traders were caught on tape bragging about how they were able to pull the wool over the eyes of their customers. Deutsche Bank's fate was sealed when Josef Ackermann became chief executive. Ackermann's stated goal was to achieve a 25% return on equity, which only pushed the bank's traders into riskier - and illegal (LIBOR fixing) - activities. Deutsche Bank - along with Lehman Brothers, Bear Stearns, Citibank and a host of other banking culprits - played a key role in the 2008 global financial meltdown. It is still paying out $Billions in penalties and faces more years of litigation for its predatory practices.
Deutsche Bank is not expected to turn a profit until 2018. Alfred Herrhausen must be turning in his grave to see the once proud-institution just a shadow of what it once was.
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