Deutsche Bank

The (in)famous Greg Lippmann is gone. The question is why? Is Deustche Bank about to report the next Wells receipt? Of course not: Goldman did not do so even though it held it for 9 months.

And here we were thinking that a $2 billion successful Bills auction, (not really) backstopped by everyone and the kitchen sink would sound the all clear on the country with the 16% budget deficit. Alas, with the 10 Year still at 350 bps over Bunds nothing at all has changed for Greece. And here comes Deutsche Bank, which has billions at risk among the PIIGS, saying Greece will very likely be forced to protect its creditors asap, or within the next month, whatever comes first if it has no market access. Alas, as real Greek bonds are still trading just south of 7%, this pretty much means the market doesn't care about the country's long-term prospects, which in our books is equivalent to "absent market access" to anything more than oilve oil and Ouzo. And the cherry on top: several European governments will be forced to have a parliament vote to approve the bail out. It appears the market still has not figured this virtually certain collapse trigger to the rescue package. When it does, the end game for Greece will truly be there.

Yesterday we asked just who the counterparties on Lehman's Repo 105 transactions were. Today we get our answer: the parties that Lehman used exclusively to mask its true leverage ratio were Barclays, Mizuho, UBS, Mitsubishi, Deutsche Bank, KBC and ABN Amro. This is accompanied by disclosure from the Examiner that these Repos, which should logically have been cheaper to Lehman due to the overcollateralization compared to regular matched repo (remember: 105 instead of 100 plus a minor haircut), in fact were pricier, prompting Lehman staffers such as Mike McGarvey to speculate that counterparties may "try to squeeze Lehman." This is quite a critical development ahead of the lawsuit between the Lehman estate and Barclays (a Repo 105 counterparty), which not only refused to bail out Lehman in the 11th hour, but to subsequently go ahead and in the definition of a fire sale acquire Lehman Brothers' North American brokerage operations for pennies on the dollar, coupled with some serious additional trickery on the side. Another oddity: none of the counterparties were US-based. Did US banks know too well about the imminent collapse of Lehman and thus refuse to participate in the Repo 105 window dressing game? Or, much more relevantly, was Lehman terrified by retaliation of its US-based peers, (be it CDS or stock-based) and as a result refused to open up its deplorable balance sheet to them?

Barely had we finished bashing Deutsche Bank in our prior post, that we noticed that Moody's had just notched Deustche Bank not once, but twice, from Aa1 to Aa3. Now where the hell are those pesky shorts who are #*$!ing up the grand German uberplan of trying to mimic the US in its don't ask/don't tell plan of financial gayness. From Moody's: "The rating agency believes that Deutsche Bank's capital ratios are likely to face further pressure from pending acquisitions, potential increases in loan-loss provisions and higher regulatory capital charges."

Greek spreads were about 10 bps tighter earlier after rumors that Deutsche Bank CEO Ackermann's meeting with Greek officials was to set the tone for a €15 billion DB loan to Greece. Even as Eurostat was analyzing the Greek swap info, and Greece announced slightly better than expected January budget data, the country was still forced to delay its bond offering as expected by Zero Hedge, despite consistent disinformation rumors spread by the Greek ministry otherwise.

Bailout rumor refusal - check, bank/country run - check, collateral pulls - check. If anybody tells you there is everything in common between Greece and Lehman/AIG, believe them. The latest escalation in the Greek crisis comes courtesy of Greek daily Banking News which notes that the latest nail in the Greek coffin comes from formerly major Greek players, Deutsche Bank and Unicredit, which over the past 2-3 weeks have ceased accepting Greek collateral and have pulled out of the Greek repo market altogether.

Yesterday we brought attention to China's overheating economy. In response, Deutsche Bank analyst Michael Spencer is now estimating an earlier than expected rate hike for the newly-minted second largest world economy. "We think January CPI inflation will be similar to December, but in February inflation could rise to 2.5%, above the 2.25% benchmark deposit rate. This implies some likelihood of the first rate hike coming in the second half of March, earlier than our current expectation of an April rate hike." Just look at China markets at what tightening means for equities. Then extrapolate to the U.S., once Bernanke someday wakes up on the right side of the bed and realizes that America is in a very much comparable situation (although 10.7% GDP growth would be something even Obama would have some problems with digesting). And now that Volcker is finally about to supplant the soon to be defunct Larry Summers as Obama's key financial advisor, one can extend Deutsche's conclusion and say that the rate hike in the U.S. may also come earlier than expected.

In January, Zero Hedge wrote about the bankruptcy of paperboard and packaging company Smurfit Stone Container Corp. As this occurred at the peak of the post Lehman crunch it was not very surprising. However, what is somewhat surprising is our recent encounter with a case study of the Jefferson Smurfit Group LBO by Morgan Stanley, in which Madison Dearborn acquired JSG for €2.3 billion, and subsequently spun off SSCC to the public. What caught our attention was the fees and expenses that the advisors charged MDP to facilitate a deal which ultimately cashed out the investor group by spinning off the eventual toxic assets of SSCC to a hapless public: Deutsche Bank and Merrill Lynch pocketed a whopping €248.5 million (yes, that's Euros). And for what: presumably for M&A fees, Loan fees, HY Bridge and Bond Fees and FX/Hedging Revenues. What they missed to point out is the primary reason for MD's generosity: extracting all the relevant assets out of a formerly stable and growing, operation, spinning off all the shitty ones (eventually attempting to arrange restructuring fees and/or DIP financing on the remaining SSCC husk), leveraging the company with a massive debt load, and subsequently IPOing into the next bull market.

After the good folks in the Deutsche Bank securitization group anticipated a 47% drop in NY housing prices in March, they have released an updated report discussing the future pain in the top 10 MSA, and the biggest outlier by a big margin, once again, is the New York-White Plains-Wayne NY-NJ MSAD.

After the good folks in the Deutsche Bank securitization group anticipated a 47% drop in NY housing prices in March, they have released an updated report discussing the future pain in the top 10 MSA, and the biggest outlier by a big margin, once again, is the New York-White Plains-Wayne NY-NJ MSAD.

After the good folks in the Deutsche Bank securitization group anticipated a 47% drop in NY housing prices in March, they have released an updated report discussing the future pain in the top 10 MSA, and the biggest outlier by a big margin, once again, is the New York-White Plains-Wayne NY-NJ MSAD.

In what is an interview for the ages, CNBC's Melissa Francis takes on DB's Chief Economist Joe LaVorgna, stupefies him (and whatever watchers the comedy channel might have left) with a definition of inflation taken straight out of Cosmopolitan, tells him he has lost all credibility (4:20 into the clip), rewriters the first chapter in Econ 101, and ploughs on even after permabull Kudlow tells her to shut up. Priceless (in both a deflationary and Cosmo's inflationary world).

In a stunner of a development, Las Vegas casino operator Fontainebleau has amended its ongoing lawsuit against a set of banks, and has alleged that Deutsche Bank is now "seeking to destroy the Fontainebleau in order to minimize competition" with the Cosmopolitan Resort and Casino, which was acquired by Deutsche Bank in a foreclosure auction in September 2008 for $1 billion, after the casino had defaulted on a $760 million loan.

Deepak Moorjani shares the below letter, which initially appeared in NYT's DealBook, but subsequently was taken down for reasons known, and now only a big gaping 404 hole remains in its place (http://dealbook.blogs.nytimes.com/2009/04/16/another-view-deutsche-banks-culture-of-risk/).

Hugo Benziger, Chief Risk Officer of DB, spoke today at the Frankfurt School of Finance and Management, saying "we are in the middle of [the crisis]".