Deutsche Bank: From bombs and bravado to risks of a bailout
By Joe Miller
BBC News
eutsche Bank is under the most pressure a major lender has faced since the 2008 financial crisis. Many, however, trace its woes back beyond the banking crash, as Joe Miller writes:
On a cold November morning in 1989, Alfred Herrhausen left his house in the Hessian town of Bad Homburg, climbed into his chauffeur-driven Mercedes-Benz, and settled in for the routine journey to his Frankfurt office.
A few minutes later, he was dead.
As the head of West Germany's largest lender, Deutsche Bank, Mr Herrhausen had been a target of the anti-capitalist, radical-left Red Army Faction.
They claimed to have planted the remote-control bomb that blew his armoured limousine a few metres into the air.
The group opposed the 59-year-old banker's "imperial" ambitions: his advocacy of closer European integration, his counsel of then-Chancellor Helmut Kohl, and his championing of economic internationalism.
But although the attackers succeeded in taking Mr Herrhausen's life, they could not extinguish his unique vision, one that paved the way for Deutsche Bank's soaring success in the Nineties and through the new millennium, and one that may have sown the seeds of its recent decline.
It is not just Deutsche's investors who are concerned. After more than 25 years of vigorous diversification, including a string of small acquisitions across the world, the bank's tentacles reach many parts of the global economy.
The IMF has called Deutsche the world's most dangerous bank, and as one insider explains "if Deutsche Bank goes down, everyone else has a problem too".
But although the German giant is in dire straits, its demise is anything but inevitable.
For one, there are now regulatory regimes in place, which mean that various bondholders and large depositors would suffer a haircut to help shore up the bank's balance sheets.
Additionally, the long shadow cast by the collapse of Lehman Brothers has left world leaders with little appetite for allowing another large lender to hit the buffers.
Nonetheless, a government bailout seems unlikely, at least in the very near future.
EU legislation makes it difficult for countries to inject cash into a failing financial institution without making sure investors take a hit first - a point Angela Merkel has been keen to make to the her Italian counterpart, Matteo Renzi, who was prevented from using Roman money to prop up the failing Monte dei Paschi di Siena bank.
Plus, as Prof Mayer explains, there is hardly any love left for the once-iconic bank among ordinary Germans, who tend to see the beleaguered lender as more of a national embarrassment.
Whatever Deutsche's fate, the almost 150-year old bank's rise and fall has served, as Prof Mayer puts it, to "refocus people's attention" on the problem that faced Alfred Herrhausen three decades ago - expansion inevitably comes with exposure.
"It was the right decision to go into investment business," the Deutsche veteran, who left the bank in 2012, insists.
"But there were difficulties in execution."
It is hard to know what Alfred Herrhausen would make of the mistakes made in pursuit of the mission he helped set in motion, and of Deutsche's prolonged failure to face up to its frailties.
But a clue to how he would handle the current crisis may lie in the inscription on the two memorial pillars erected on the site of the pioneering chief executive's murder.
A quote by Austrian poet Ingeborg Bachmann, it reads: "Die Wahrheit ist dem Menschen zumutbar."
"People," it translates, "can handle the truth."
(continued, socialization of losses and privations of profits....soon enough then?) wir hängen da alle
