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GEOFINANCE/ Europe one step away from the first financial world war

MAURO BOTTARELLI comments on the accusations leveled at Deutsche Bank and on what they mean in terms of the present situation of the Eurozone and its future.

(Infophoto) (Infophoto)

There is a feeling of the fall of the gods in the air, and the showdown is beginning. The Financial Times, in fact, has set down that there are no more untouchables, publishing a front-page story in which Deutsche Bank is accused of refusing to recognize $12 billion in losses during the financial crisis on a large position linked to derivatives, thus avoiding asking the German government for a bailout. This is according to the condemnation to the U.S. authorities by three former employees of the German bank.

According to the newspaper of the City, Deutsche Bank misjudged a large position in derivatives (called “leveraged super senior trades”) and the three former employees say that, if the position had been assessed properly, at about $130 billion, the level of capital of the Deutsche Bank would have fallen to dangerous levels during the crisis and would have forced the bank to ask the German government for a bailout. Instead, the three accusers argue, traders of the bank (and their superiors knew about this) did not record the mark-to-market losses during the severe crisis of the Stock Exchange between 2007 and 2009. The question, then, also touched the American guru Warren Buffett, since the three former employees argue that the bank did not correctly calculate the amount of the insurance taken from Berkshire Hathaway on certain positions.

What did the Deutsche Bank respond to these accusations? Did they sue the Financial Times? No, they replied in a statement that the allegations are two and a half years old and were publicly registered in June 2011. What is more, they say that the charges were the subject of careful investigation (I imagine internally) and at the end they turned out to be totally unfounded. How strange! Deutsche Bank, then, promised to continue to cooperate with the SEC to clarify all of these things. How good they are! I would really like to see at which values those positions were entered in the balance sheet; this would be the best Christmas gift.

Nonsense aside, the Financial Times wrote that the accusations were made at different times between 2010 and 2011 and are independent of each other. In addition, the people involved spent hours with SEC officials and two former employees of Deutsche Bank said that they had been expelled from the bank after having reported their concerns within the institution. It is not the accusation itself that is worrying, but the timing with which the Financial Times launched it, seeing as the newspaper does not publish news, but sends messages. In short, the war on Europe and the euro has begun.