Is Deutsche Bank The Next Lehman?

Tyler Durden's picture




 

Submitted by NotQuant.com

Looking back at the Lehman Brothers collapse of 2008, it’s amazing how quickly it all happened.  In hindsight there were a few early-warning signs,  but the true scale of the disaster publicly unfolded only in the final moments before it became apparent that Lehman was doomed.

MI-CB391_PECK_G_20140218184730

First, for purposes of drawing a parallel, let’s re-cap the events of 2007-2008:

There were few early indicators of Lehman’s plight.   Insiders however, were well aware:   In late 2007, Goldman Sachs placed a massive proprietary bet against Lehman which would be known internally as the “Big Short”.  (It’s a bet that would later profit from during the crisis).

In the summer 2007 subprime loans were beginning to perform poorly in the marketplace.  By August of 2007, the commercial paper market saw liquidity evaporating quickly and funding for all types of asset-backed security was drying up.

But still — even in late 2007,  there was little public indication that Lehman was circling the drain.

Probably the first public indication that things were heading downhill for Lehman wasn’t until June 9th, 2008,  when Fitch Ratings cut Lehman’s rating to AA-minus, outlook negative.   (ironically, 7 years to the day before S&P would cut DB)

The “negative outlook” indicates that another further downgrade is likely.   In this particular case, it was the understatement of all time.

A mere 3 months later, in the course of just one week,  Lehman would announce a major loss and file for bankruptcy.

article-2203390-1504DEE9000005DC-669_634x346

And the rest is history.

 

Could this happen to Deutsche Bank?

First, we must state the obvious:  If Deutsche Bank is the next Lehman, we will not know until events are moving at an uncontrollable and accelerating speed.   The nature of all fractional-reserve banks — who are by definition bankrupt at all times – is to project an aura of stability until that illusion has already begun to implode.

By the time we are aware of a crisis – if one is in the offing — it will already be a roaring blaze by the time it is known publicly.   It is by now well-established that truth is the first casualty of all banking crises.  There will be little in the way of early warnings.   To that end, we begin connecting the dots:

Here’s a re-cap of what’s happened at Deutsche Bank over the past 15 months:

  • In April of 2014,  Deutsche Bank was forced to raise an additional 1.5 Billion of Tier 1 capital to support it’s capital structure.  Why?
  • 1 month later in May of 2014, the scramble for liquidity continued as DB announced the selling of 8 billion euros worth of stock at up to a 30% discount.   Why again?  It was a move which raised eyebrows across the financial media.  The calm outward image of Deutsche Bank did not seem to reflect their rushed efforts to raise liquidity.  Something was decidedly rotten behind the curtain.
  • Fast forwarding to March of this year:   Deutsche Bank fails the banking industry’s “stress tests” and is given a stern warning to shore up it’s capital structure.
  • In April,  Deutsche Bank confirms it’s agreement to a joint settlement with the US and UK regarding the manipulation of LIBOR.   The bank is saddled with a massive $2.1 billion payment to the DOJ.  (Still, a small fraction of their winnings from the crime). 
  • In May,  one of Deutsche Bank’s CEOs, Anshu Jain is given an enormous amount of new authority by the board of directors.  We guess that this is a “crisis move”.  In times of crisis the power of the executive is often increased.
  • June 5:  Greece misses it’s payment to the IMF.   The risk of default across all of it’s debt is now considered acute.   This has massive implications for Deutsche Bank.
  • June 6/7:  (A Saturday/Sunday, and immediately following Greece’s missed payment to the IMF) Deutsche Bank’s two CEO’s announce their surprise departure from the company.  (Just one month after Jain is given his new expanded powers).   Anshu Jain will step down first at the end of June.  Jürgen Fitschen will step down next May.
  • June 9: S&P lowers the rating of Deutsche Bank to BBB+  Just three notches above “junk”.  (Incidentally,  BBB+ is even lower than Lehman’s downgrade – which preceded it’s collapse by just 3 months)

And that’s where we are now.  How bad is it?  We don’t know because we won’t be permitted to know.  But these are not the moves of a healthy company.

deutsche_ceos2

Jürgen Fitschen will step down May 2016. Jain will step down at the end of this month.

 

How exposed is Deutsche Bank?

The trouble for Deutsche Bank is that it’s conventional retail banking operations are not a significant profit center.  To maintain margins, Deutsche Bank has been forced into riskier asset classes than it’s peers.

Deutsche Bank is sitting on more than $75 Trillion in derivatives bets — an amount that is twenty times greater than German GDP.    Their derivatives exposure dwarfs even JP Morgan’s exposure – by a staggering $5 trillion.

With that kind of exposure, relatively small moves can precipitate catastrophic losses.   Again, we must note that Greece just missed it’s payment to the IMF – and further defaults are most certainly not beyond the realm of possibility.

 

Not good.

Not good.

And if the dominos were not adequately stacked already, there is one final domino which perfects the setup.

Meet Tom Humphrey.  He heads up Deutsche Bank’s Investment Banking operations on Wall Street.

He was also head of fixed income at Lehman.

Prior history.

Prior history.

History never repeats.   But it does rhyme.    In market terms, it tends to rhyme just about every 7 years.

* * *

For more read the Zero Hedge piece from April 2014: The Elephant In The Room: Deutsche Bank's $75 Trillion In Derivatives Is 20 Times Greater Than German GDP

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Fri, 06/12/2015 - 12:20 | 6190359 ZH Snob
ZH Snob's picture

Yes it could.  Douche Bank is next.

Of course, Lehman was a sacrificial goat to save Goldman.  For whom or what is the Douche being sacrificed, if it is indeed a sacrifice at all? 

looks more like suicide to me, here at ground level.

Fri, 06/12/2015 - 12:29 | 6190401 walküre
walküre's picture

DB is not LEH

Greece is LEH x 100

DB is AIG

Who has a "big short" on DB?

Fri, 06/12/2015 - 12:34 | 6190421 Jaspergers
Jaspergers's picture

Throw those pathetic ger- nah I said I wouldn't....

Fri, 06/12/2015 - 12:38 | 6190433 walküre
walküre's picture

Those laws on capital controls weren't passed and debated at great length if the lawmakers didn't see this coming.

At the very least I suspect capital controls in GR and DE, FR. Possibly across the entire EZ.

Fri, 06/12/2015 - 12:41 | 6190438 Save_America1st
Save_America1st's picture

"History never repeats.   But it does rhyme.    In market terms, it tends to rhyme just about every 7 years."

Every 7 years, you say???  Well it just so happens that's coming up in September.  Read below:

7 Key Events That Are Going To Happen By The End Of September

http://endoftheamericandream.com/archives/7-key-events-that-are-going-to-happen-by-the-end-of-september

Fri, 06/12/2015 - 12:44 | 6190458 walküre
walküre's picture

just promise us you won't try and play these events with a couple short bets...

 

Fri, 06/12/2015 - 13:35 | 6190581 NoDecaf
NoDecaf's picture

Anyone know if that blonde is working on her laptop at home, making 7k a month?

Fri, 06/12/2015 - 14:34 | 6190759 813kml
813kml's picture

She's a headhunter's wet dream:  "There are many, many, many positions that I could put you in."

Fri, 06/12/2015 - 14:36 | 6190830 Beam Me Up Scotty
Beam Me Up Scotty's picture

Dats sexiss......

Fri, 06/12/2015 - 15:09 | 6190984 Rubicon
Rubicon's picture

She has a cute box.

Fri, 06/12/2015 - 15:33 | 6191089 Boris Alatovkrap
Boris Alatovkrap's picture

Dirty secret that is Douche Bank. Something is dead fish in Denmark.

Fri, 06/12/2015 - 16:46 | 6191352 Bokkenrijder
Bokkenrijder's picture

Could this be why there will NOT be a Grexit or Graccident?

Not because it makes economic sense, but because DB will otherwise probably collapse and additionally because Obama needs Greece for his bullying of Russia.

Fri, 06/12/2015 - 17:51 | 6191559 THE 4th Quadrant
THE 4th Quadrant's picture

Hey.
Either you're a douche or a bank. How can you be both a douche and a bank at the same time.

OH!

Fri, 06/12/2015 - 21:15 | 6192115 weburke
weburke's picture

yes its the next lehman

 

Sat, 06/13/2015 - 00:00 | 6192461 Oh regional Indian
Oh regional Indian's picture

DB is rumored to be the Bush Bank. JosefAckerman and Daddy were into a lot of business deals together and even 9/11 was supposed to have burned a bunch of documents that would have taken DB under back in 2000.

So, if this is really a fight amongst the fallen leaders, then maybe DB is in some danger.

If the boooosh cabal is still strong, DB ain't going nowhere.

Yet.

On the other hand, they have loaded he up to the gills with Toxic Derivatives. Obviously on purpose. SUch things don't just happen.

4th Reich seems to have planned things well to confuse and defuse....

So ist das leben....

Zeees ees "notes" from all over...

https://www.youtube.com/watch?v=lk1TSBW_368

 

Sat, 06/13/2015 - 01:40 | 6192588 palmereldritch
palmereldritch's picture

Boy, die schnell eskalierten ... Ich meine, die wirklich aus dem Ruder lief schnell.

Sat, 06/13/2015 - 02:55 | 6192637 The Blank Stare
The Blank Stare's picture

Well, I saw it coming in 2005, and I'm just a dumbass English language teacher. Tell me what I should buy this time please?

Sat, 06/13/2015 - 08:34 | 6192829 Truthseeker2
Truthseeker2's picture

It appears the DB co-execs resigned because of massive derivative exposure ... some of which just exploded. 

 

A Derivatives Bomb Exploded Within The Last Two Weeks

Sat, 06/13/2015 - 09:56 | 6192973 Shitters_Full
Shitters_Full's picture

Since you're an English teacher can you contact the author and explain the difference between its and it's? Fucking killing me here.

Fri, 06/12/2015 - 18:04 | 6191608 Bob
Bob's picture

How much of that $75T derivative exposure is connected, directly or indirectly, to Greek debt?  Genuine conflict (apart from apparent conflict) with neo-liberal Russia remains to be proven. 

Fri, 06/12/2015 - 21:25 | 6192143 Captain Debtcrash
Captain Debtcrash's picture

Society will relearn the dangers of the banking industry over the next decade.  Too bad we couldn’t learn from the Great Depression  counter-intuitively  the result of which was only to make the banks and government stronger at the expense of everyone else. 

Hopefully the next crisis will see us reigning in that power, unfortunatly history doesn't support that outcome and we will likely see continued strengthening of the govt and banks.  

Fri, 06/12/2015 - 23:56 | 6192443 Richard Chesler
Richard Chesler's picture

"Looking back at the Lehman Brothers collapse of 2008, it’s amazing how quickly it all happened"

Not fast enough for my put options to really come in the money once it was clear these clowns were toast.

Fuck off and die already you miserable bankster mouthpiece.

Fucker!


 

 

Sat, 06/13/2015 - 06:44 | 6192741 Squid-puppets a...
Squid-puppets a-go-go's picture

I think less of the $75T is on greek debt than is in betting that the Fed would have raised rates by now. How much of the 1.5 Quadrillion is in bets that the Fed would have raised rates prior to june 2015 - THATS THE KICKER - that alone may be enough to destroy more capital than the GDP of a major nation

Sat, 06/13/2015 - 11:14 | 6193171 Bendromeda Strain
Bendromeda Strain's picture

Or, as Tony Soprano would say "they ain't nothin' but a bunch of degenerate gamblers".

Sat, 06/13/2015 - 05:54 | 6192726 Troy Ounce
Troy Ounce's picture

 

Bob

I see derivative exposure as a room filled with hundreds of armed mouse traps, big and smal. Mouse traps jump, when released, randomly in the air on top of other mouse traps which will then release themselves and jump....etc.

1. There is no way to contain it

2. the damage is enormous

3. It will be short and explosive.

But which fucker did put these mouse traps there in the first place? Don't they think?

Sat, 06/13/2015 - 10:43 | 6193086 Oh regional Indian
Oh regional Indian's picture

Interesting visual TroyO.

Of course they think...really long (millenia) and hard....

That is WHY this situation....

Fri, 06/12/2015 - 18:56 | 6191760 Tall Tom
Tall Tom's picture

The imbalances existed BEFORE the Grexit.

 

You must understand that nothing happens by accident.

 

Greece is being set up...AS THE EXCUSE.

 

The reasons will not be exposed.

Fri, 06/12/2015 - 19:18 | 6191805 Tall Tom
Tall Tom's picture

If this is not the case then why, pray tell, were two traders for Douche, last week, caught illegally trading Derivatives at Russian and London Banks?

 

I posted the link to that article last week.

 

Do you really think that we have short memories over here at Zerohedge?

 

Here it is again...

 

From REUTERS via Bix Weir...

 

When Deutsche Bank announced that they are "internally investigating" $6B of suspected money laundering by their clients it just looked like another run of the mill money laundering case. A big one but one that can be nestled away in the attic with paying a few fines and taking a couple write downs. But what they describe is NOT a money laundering scheme but rather a problem with their derivatives book!

Deutsche Bank Probes $6B Suspected Money Laundering
http://www.reuters.com/article/2015/06/05/us-deutschebank-russia-idUSKBN0OL24220150605

"Deutsche Bank was investigating whether its employees in Moscow may have helped launder at least a triple-digit million-euro amount of money through the purchase and sale of over-the-counter derivatives in Moscow and London."

 

Your downarrows do  not change the truth.

 

So go and fuck yourself Douchemeister.

 

The game is OVER and it is time to CELEBRATE THE COLLAPSE OF THE FRAUDULENT AND CORRUPT SYSTEM.

Fri, 06/12/2015 - 20:45 | 6192023 walküre
walküre's picture

Good thoughts. TPTB need an excuse and they need scapegoats, patsies and the whole nine yards. The system is cracking.

Fri, 06/12/2015 - 23:26 | 6192410 Money Boo Boo
Money Boo Boo's picture

I thought last year ZH was saying China real estate was going to go bust and be the next Lehman and on a global scale. TIS even backed up the claim vociferously in 2014 even though the new TIS is not the same dude but an amateur impostor.  The reason I bring this up is this claim that there's a clear idea of what the trigger is going to be has essentially been wrong ever since the actual Lehman event. The system is cracking and has been for 40 years, who's to say it can't go at least another 10?  The fuckers run the show from top to bottom.

Sat, 06/13/2015 - 00:07 | 6192469 Oh regional Indian
Oh regional Indian's picture

Yes BooBoo, the new TIS is a terrible replacement for th eold one. In fact, so many old handles are popping back. Some (Like Bob) sound the same.

Others have changed.

I wonder where Hephasteaus has gone. And my personal favourites Ahmeenxal (sp) and one amazingposter who served the most amazing links and wrote powerfully as well.....hmmmmm.....all good...

Sat, 06/13/2015 - 02:10 | 6192604 palmereldritch
palmereldritch's picture

It's about control. 

And chaos is particularly hard to control and thus typically avoided and manipulated as part of the hologram but being control freaks they think chaos is always within their control which, eventually, it is not.

And being the arsonists that they are, they are rarely burnt and thus invariably enjoy the show that much more. Because it pays in the short term and particularly in the long term for which they are prepared.

Because out of chaos they will impose their order and fulfill "their control destiny".  Being the Gods of Delusion is their reality...fueled by the illusions of our ignorance and passivity.

And so the fractal unfolds....

Sat, 06/13/2015 - 04:50 | 6192704 winchester
winchester's picture

Could this be why there will NOT be a Grexit or Graccident?

Not because it makes economic sense, but because DB will otherwise probably collapse and additionally because Obama needs Greece for his bullying of Russia.

 

bet explanation so far.

Fri, 06/12/2015 - 21:58 | 6192213 LongMarch
LongMarch's picture

Fucking Classic Boris.

Where have you been?

Sat, 06/13/2015 - 08:17 | 6192806 RogerMud
RogerMud's picture

maybe that's her phone number:  212-243-1058

Fri, 06/12/2015 - 14:04 | 6190689 auntiesocial
auntiesocial's picture

Has anybody seen this yet?

SANTA ANA CALIFORNIA POLICE BUSTED ON CAMERA- 

https://www.youtube.com/watch?v=JTKTfUHfeKM

Fri, 06/12/2015 - 18:22 | 6191662 WOAR
WOAR's picture

Good find. That was seriously horrible to watch.

I'm waiting for a new ZH member to show up named "Mrs. Stubs."

Fri, 06/12/2015 - 23:30 | 6192421 Not My Real Name
Not My Real Name's picture

A Santa Ana cop lives down the street from me. The only reason I know this is because he drives his black-and-white to and from work every day and parks the car in his driveway -- I would guess I live about 40 miles from Santa Ana. Pisses me off every time I see that damn car, knowing that the taxpayers are subsidizing his ride to work and back day in an day out.

And that's on top of the $100,000+ pension which he'll take as soon as he retires at age 50.

Sat, 06/13/2015 - 07:05 | 6192753 Tall Tom
Tall Tom's picture

Post his address.

 

There is nothing illegal about doing that and only that.

Fri, 06/12/2015 - 14:04 | 6190690 auntiesocial
auntiesocial's picture

Has anybody seen this yet?

SANTA ANA CALIFORNIA POLICE BUSTED ON CAMERA- 

https://www.youtube.com/watch?v=JTKTfUHfeKM

Sat, 06/13/2015 - 23:03 | 6194681 Slomotrainwreck
Slomotrainwreck's picture

Meet Tom Humphrey.  He heads up Deutsche Bank’s Investment Banking operations on Wall Street.

He was also head of fixed income at Lehman.

Mon, 06/15/2015 - 08:23 | 6197338 investor31
investor31's picture

'7' That number 7 just keeps keeping on.

Mme C Lagarde IMF CEO speech to National Press Club tested them on their numerology skills and geuss what " '7' is the magic number"

Go check it out on Utube very interestng stuff indeed.

Fri, 06/12/2015 - 12:40 | 6190446 ZH Snob
ZH Snob's picture

a big short on DB, bonds or any other thing is fruitless at this point.  Like Bill Holter pointed out: any of these events will end the financial world as we know it, so what good will a pile of dollars be once the house has gone up in flames?

Fri, 06/12/2015 - 13:02 | 6190502 Fish Gone Bad
Fish Gone Bad's picture

It would make a really NICE fire.

Fri, 06/12/2015 - 18:23 | 6191663 Bob
Bob's picture

Save wood for that, the afterwinnings will all be digital and denominated in a new currency, most likely.  It will, after all, be billed as Gotta Save The World! 

Hank Paulson's bullshit was just a proof of concept. 

Fri, 06/12/2015 - 17:07 | 6191408 bunnyswanson
bunnyswanson's picture

August 2013, Pettinato & ASSociates, an investigator of lost money, notified me 103 shares were sitting in Calif Unclaimed Property division in my name as Jt Tennant to my now deceased xhusband.  Nearly 2 years later, and I have still not received these shares (DWS World Dividend Fund-S).  Despite Probate Code Section 5604 (c) (2), they refuse to give me the funds.  Yet, Pettinato and ASSocites took 10% of the shares which is ILLEGAL.  I am preparing as we speak to take them to Small Claims Court.  They had me running up and down the street from the courthouse to the bank for Medallion Signature Guarantee (after they found me) during which time I was notified state of Calif attempted to desposit these funds into a check account (Wells Fargo) which of course is impossible.  They are DRAGGING their feet.  The disrespect displayed to me (uppity) by these thieves in good jobs (like I am trying to steal this money from my husband's estate) is beyond comprehension.

Sat, 06/13/2015 - 08:07 | 6192796 AE911Truth
AE911Truth's picture

Who has a "big short" on DB?

The counterparty for their derivitives?

 

Sat, 06/13/2015 - 11:50 | 6192976 ThirteenthFloor
ThirteenthFloor's picture

Walkure -> Greece is the mortgage borrowers and DB is Lehman. Recall DB bought Bankers Trust a pidgeon hole for the FRB, DB will fall this time.

For those that do not know DB owns MetLife as well. DB bought Bankers Trust and their building across from WTC on Liberty. Then after 9-11 the building was demolished due to "mold".

Sat, 06/13/2015 - 15:25 | 6193810 walküre
walküre's picture

Not quite though. DB didn't make the loans to GR. The loans are by private and public funds which have secured the loans with derivative guarantees from DB. The way I see it, DB is more of an insurer on said loans. That DB is pickled with corruption and manipulation is clear.

Fri, 06/12/2015 - 13:44 | 6190602 tarsubil
tarsubil's picture

If it happens, someone better get the full video of Joe jumping.

Do NOT follow this link or you will be banned from the site!