There’s a lot of bravado out there on the Deutsche Bank of the Rhine at the minute. Is there really any substance to it? The Slog investigates.
The Deadly Deutsche Bank Dénouement continues. A year into the job from Hell, CEO John Cryan this morning sought to “reassure” everyone by saying that a bailout from Berlin was “out of the question”. In a somewhat déja écouté statement made of pure Lehman Bear Stearns, the DB boss said his UXB was “comfortably equipped with liquidity”.
The reassurance lasted about 90 minutes, following which the brief regain of share price respectability stopped dead. The technical term for that is “stabilisation”. But for how long?
Four key players will, I suggest, be stepping unwillingly into the limelight during the coming days: Mario Draghi, who knows a DB collapse is Game Over for the eurozone banking system; Angela Mirakel, who knows it’s Game Over for her if a bailin occurs; the Bundesbank’s Jens Weidmann, who knows it’s Game Over for his credibility if (having been so rudely wrong about Brexit) Deutsche now screws up Schäuble’s Fiskalunion; and Jean-Claude Wanker, who knows it’s Game Over for his single currency if the DB legs face the sky with a rigidity suggestive of irreversible rigor mortis.
We are, I predict, on the verge of Act III in this by now familiar comedy of errors….in which the markets demand that Something Be Done. Cryan has already tried answering this by revealing that Deutsche is selling its Abbey Life subsidiary (as it happens, a former client of mine) but the price tag still only amounts to around 6% of the American fine the bank faces.
Meanwhile, I said yesterday that there is little or no difference between bailout and bailin. I would now like to revise that opinion on a couple of dimensions.
First, one very real difference is that bailin cuts out the middleman called the HMRC in the UK, or the IRS in the US. The timing is thus immediate: without any delay whatsoever, your money disappears.
Second, your money is of course post-tax money. You already paid tax on it, now you lose two ways. This makes your loss around 18-25% higher than it would’ve been under bailout.
Do you recall, in 2014, snote-corking Chancellor George Osborne saying he wanted to give relief to the taxpayer by switching from bailout to bailin? Well, he was lying through his teeth: taxpayers are better off out than in – so to speak.
What a tinker Little Osborne was, eh?