Opinion: Angela Merkel has bungled the Deutsche Bank crisis, like everything else, 9/30/16. Instead of having a steady hand, German chancellor lets things get out of hand.
It would be a sadly fitting capstone to Angela Merkel’s
checkered tenure as chancellor of Germany if her mishandling of the Deutsche
Bank crisis leads to a cascade of bank failures in Europe and
completes her destruction of the euro. EURUSD, -0.0089% .
Earlier this week, MarketWatch columnist Matthew Lynn incisively
analyzed the crisis facing Germany’s
largest bank and the crucial need for Berlin not only to be ready to intervene
but to let the world know it right now.
The German government is denying that it has any plans or
intention of bailing out the bank, which by any measure is a globally systemic
financial institution — that is, its failure would inevitably trigger a global
banking crisis.
While German banks, and Deutsche in particular, enjoyed a solid
reputation for much of the postwar period, it was the collapse of Austrian and
German banks in 1931 that led to a worldwide banking crisis, perhaps
contributing as much to the onset of the Great Depression as the U.S. stock
market crash in 1929.
The new Deutsche Bank crisis is just the latest chicken that has
come home to roost for Merkel. Her unilateral decision last year to open
Germany’s borders to Syrian refugees has led to political turmoil at home and
riven Europe.
As a result, her Christian Democratic party has suffered
dramatic losses in two recent regional elections, one in her home province of
Mecklenburg-Vorpommern and the latest in the German capital, Berlin.
See Video Opinion Journal: Raiding Deutsche
Bank (3:58) Europe
Editorial Page Editor Joseph Sternberg on the regulatory assault on one of
Europe’s biggest banks. Photo credit: Bloomberg.
In accepting responsibility for these electoral defeats, Merkel
said she regretted not paying attention earlier to the growing crisis in the
Middle East and its potential impact on Europe.
And the reason she was not paying attention, of course, was
because she was fixated on her blinkered policy of pommeling Greece into the
ground for running afoul of the strict conditions Germany has placed on euro
membership. In that long-running crisis, Merkel rejected any compromise or
sense of European solidarity as she drove Greece into a devastating recession.
This uncompromising stance also prolonged the recession and drove up
unemployment in other Southern European countries.
Let’s not even dwell on the European Union’s bungled efforts to
recruit Ukraine for EU membership in such a heavy-handed way it forced a
revolution in Kiev and provided an opening for Russian President Vladimir Putin
to annex Crimea and to infiltrate border areas.
During all this time, Merkel was lionized in the press — in
Germany, in Europe, and even in the U.S. — as Europe’s de facto political
leader and a rock of stability for the continent, even as she repeatedly
demonstrated that she had no strategic vision and pursued strictly tactical
goals to ensure that her party remained in power in Germany and that she
remained chancellor.
This is, after all, the politician who stabbed her political
mentor, longtime Chancellor Helmut Kohl in the back; ruthlessly elbowed aside
Kohl’s crown prince, Wolfgang Schäuble; destroyed her erstwhile coalition
partner, the Free Democrats; and yet has been revered by German voters as
“Mutti” — which translates as “Mommy” but might more accurately be rendered as
“Mommy Dearest.”
Which brings us back to Deutsche Bank. Well into the 1980s,
Deutsche was one of the few triple-A-rated banks in the world. For better or
worse, it had been a power in Germany’s convulsive history since its founding
in 1870, and in the postwar years pursued a conservative strategy that kept it
strong.
The problems began when Alfred Herrhausen, a brash and
self-confident utility executive, came to the helm of Deutsche in 1985, and
made a conscious decision to break with this tradition of conservatism. He was
tragically assassinated by German terrorists in 1989.
His successor, Hilmar Kopper, sought to emulate Herrhausen’s
ambition, but unfortunately lacked his vision and talent. He followed through
on Herrhausen’s ill-fated decision to acquire British merchant bank Morgan
Grenfell and to launch Deutsche into the global competition with Anglo-Saxon
investment banks that has led to the German bank’s decline and fall.
The curious inferiority complex that runs through German history
then became evident in the bank’s decision to put foreigners in charge, either
as chief executive or co-chief executive. Some of them never even learned German.
There was the Swiss Josef Ackermann, the Anglo-Indian Anshu
Jain, and currently the British banker John Cryan who became the stewards of
one of Germany’s proudest institutions — and successively ran it into the
ground in the reckless pursuit of markets they never understood and abandonment
of any shred of ethical behavior.
It’s hard to know how much of this history Merkel is aware of,
if any. For the daughter of a Lutheran pastor who grew up in East Germany and
trained as a chemist, it would be hard to fully catch up with the intricacies
of Germany’s sophisticated market economy.
Ironically, the trigger for the current collapse of Deutsche’s
stock price is the $14 billion fine proposed by the U.S.
Department of Justice for the German bank’s infractions in
selling mortgage securities — just another example of the “me-too” mentality
driving Deutsche’s managers and reducing it to its sorry state today.
It is truly inconceivable that even Merkel would actually allow
Deutsche Bank to fail, but her modus operandi of waiting too long to
acknowledge crises and then kicking the can down the road may already have done
irreversible damage.
http://www.marketwatch.com/story/angela-merkel-has-bungled-the-deutsche-bank-crisis-like-everything-else-2016-09-30
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