John Mack: Don't Worry About Deutsche Bank, It Will Be Bailed Out By The Government

Tyler Durden's picture




 

When it comes to government bail outs of insolvent banks few are as qualified to opine as John Mack who was CEO of Morgan Stanley when the bank, along with all other U.S. TBTF banks, was bailed out with a multi-trillion rescue package in the aftermath of the Lehman failure. Which is why it was illuminating, if not surprising, that during an interview with Bloomberg TV discussing the future of Deutsche Bank, John Mack said that "there’s no question in my mind, it is absolutely good for every penny." In other words, "Deutsche Bank is fine."

Why is he so confident? According to Mack, "this idea that I heard yesterday, the possibility of not making their interest payments, it’s just absurd. The government will not let that happen."

Said otherwise, it will be bailed out. One wonders if Germany's citizens were polled before John came up with this conclusion.

This is what else he said:

While German regulators at this point shouldn’t ban short-selling as U.S. authorities did in the 2008 financial crisis, the German central bank should make a statement in support of the lender, Mack said. Deutsche Bank shares jumped the most in almost seven years Wednesday, paring a decline that had exceeded 40 percent this year.

 

“People overreact,” Mack said. “The bank’s name is Deutsche Bank. It’s the German bank. Politically, they will stand up, if they need a safety net, and give it to them.”

Which was to be expected: after all DB had a gross notional derivative exposure of roughly $60 trillion as of 2014, several times greater than the GDP of Europe, and a net balance sheet which is a large portion of German GDP.

 

This is also why last thing Germany, Europe, or the world's central bankers will allow, is DB to fail, and it has never been a question whether or not they will try to, but whether and how they can save it. And, if a political bailout is unfeasible in the current climate, whether instead of a bailout, would Deutsche Bank be the first major European bank to rely on Europe's new "bail in" regime to stuff depositors for any capital shortfalls.

Still, without focusing on the specifics, a government (or ECB) backstop is precisely what the market is contemplating today as noted earlier, and as manifested in the stock which has soared the most in 5 years, just as Lehman did in its turbulent final days.

 

Mack's full interview is below.

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Wed, 02/10/2016 - 11:48 | 7165331 IridiumRebel
IridiumRebel's picture

It'll be bailed in by depositors.

Wed, 02/10/2016 - 11:49 | 7165349 slaughterer
slaughterer's picture

"Deutsche is FIIINNNE Carl."

Wed, 02/10/2016 - 11:52 | 7165361 Haus-Targaryen
Haus-Targaryen's picture

Regrettably the Finanzamt doesn't have the funds to bailout DB.  I can see how this will play out though, because Schäuble cannot afford this:

DB is about to go tits up and blow up the whole world.
NY Fed monetizes Germany's Gold in NYC and ships USDs to the German government, to which the German government sends IOUs back to the US, and thus part of this shit gets bailed out.  This will only happen when Germany cannot raise money anymore, and given the sheer size of DB, would occur in pretty short order. 

Or they could go after the depositors ....

If you have DB, I would be clearing out the ATM after every deposit, if possible.

Wed, 02/10/2016 - 12:00 | 7165395 wildbad
wildbad's picture

@Haus-Targaryen - exaclty right.  We know how easy it was LAST TIME Ferkel bailed out the banks...second time will be easier.  The depositors will be only a one day sideshow.

Wed, 02/10/2016 - 12:05 | 7165409 EscapeKey
EscapeKey's picture

i'm not sure. i doubt the political capital exists anywhere to bailout the institutions a 2nd time around.

it will happen behind the curtains next time around.

Wed, 02/10/2016 - 12:08 | 7165438 Haus-Targaryen
Haus-Targaryen's picture

From the average idiot's perspective, which would be harder to swallow:

1) DB gets bailed out by the government.  The government borrows the money in FX to bail out DB and they have to pay interest on it forever. 

2) DB gets bailed in to the tune of 10% of everyone's account over 2.000€? (Thats something like 90 Billion EUR capital increase overnight)

Wed, 02/10/2016 - 12:12 | 7165467 EscapeKey
EscapeKey's picture

no, i understand that - but i think the systemic importance of Deutsche would mean Fed involvement, and probably some behind-the-curtains repo-105 deals when someone comes to look at their balance sheets... you know, "just until the assets recover to fair value".

merkel/schauble would drop majorly in polls were it was announced comparatively to 2008...

 

Wed, 02/10/2016 - 12:21 | 7165538 Haus-Targaryen
Haus-Targaryen's picture

The problem is essentially all of DB's assets are impaired already, including their HQ and fleet of e-vehicles.  Leased or already pledged. 

DB is the definition of a zombie-bank running off of operating cash flows and lacking the ability to lose -- say either 6% of the depositor base or write down "cash equivlants" used to pledge against liabilities (I am looking for PIIGS debt there).

Wed, 02/10/2016 - 12:50 | 7165696 spastic_colon
spastic_colon's picture

anyone else tired of everyone using the word "government" like it is some detachment from taxpayers?  Ya know.....that mysterious entity that lurks in the dark and saves everyone at just the right moment, no need to worry.

Wed, 02/10/2016 - 13:58 | 7166062 Pairadimes
Pairadimes's picture

That's very interesting, Mack. That's the ONLY reason to worry about Deutsche Bank.

Wed, 02/10/2016 - 14:05 | 7166090 Tarzan
Tarzan's picture

German and Euro GDP is about 17 trillion combined, and they're going to bail out DB with over 60 Trillion in Derivative exposure?

They're going to be bailed out by what government?

These TBTF banks are bigger then any Government on the planet...

Wed, 02/10/2016 - 12:52 | 7165713 EscapeKey
EscapeKey's picture

are they still sitting on greek bonds? i would have thought all greek bonds had by now been snapped up by bargain hunters at the ECB.

Wed, 02/10/2016 - 13:02 | 7165775 JRobby
JRobby's picture

Bailouts for all you reckless, moral-less motherfuckers!

Shoot them all in the face, then hang them up-side-down!

Wed, 02/10/2016 - 13:05 | 7165794 Tarzan
Tarzan's picture

I keep hearing the MSM asking Bernie the same question over and over, who's going to pay for it?  A legit question that should be asked.

But funny, fox and friends never asks that question when it comes time to bail out another TBTF Bank, Auto Maker, etcFunny also MSNBC only bothers ask the question when it's not a progressive welfare plan.

When DB collapses and their creditors hand stretches out for a bail out, will the talking heads be there to ask who's going to pay for it?  Why should bad bets be made whole?  To save us from the hell we've created, we shovel our folly onto our Grand Kids?

Truth keeps knocking at the door with it's own question, what's the difference between a Socialist and a Crony Capitalist?

Mostly just the recipient of the welfare....

Wed, 02/10/2016 - 13:10 | 7165813 Deathrips
Deathrips's picture

The government only has as much money they can steal from you.....

 

they mean the taxpayers are going to bail out DB.

 

RIPS

 

 

Wed, 02/10/2016 - 13:57 | 7166051 CJgipper
CJgipper's picture

If you ever have to ask, "But who's going to pay for it?" then the answer is always - you.

Wed, 02/10/2016 - 14:51 | 7166224 swmnguy
swmnguy's picture

That question drives me crazy.  The "free shit" Sanders promises is stuff we're all already paying for; we're just not getting it.  Health care and higher education, to name two.  And yes, we're all paying for it.  Apparently it's a different kind of money if we pay insurance companies and college lenders, than it is when we pay taxes?  Being looted by crony corporate interests is better than being looted by the government?  It used to be, when we would actually get what we were paying for.  But now?

The key is, the Elite-owned media preach we can't afford what we're already paying for, if it would go to the middle and lower classes.  There's never any shortage of money for the war machine, or corporate entities that have looted themselves and call in the favors they've bought from the political establishment.  Playing the lottery run by the house, there's always more money for that.  Actually paying the bills; nope, can't afford it.  You're on your own, suckers.  It's pretty much a two-man con.

Everything Sanders promises is easily affordable.  We would have to stop transfusing money through the corpse of Wall Street.  We would have to cut the war machine spending by at least half, if not knocking a zero off it.  We'd still spend more on our war machine than anyone else, of course.   But much less payola spewing around.

As for the horrors of government health care, ever deal with private health care?  Or colleges?

Wed, 02/10/2016 - 16:31 | 7166719 Tarzan
Tarzan's picture

I partly agree, but the point was

regardless of the recipient, welfare is sanctioned robbery

"There's never any shortage of money for the war machine, or corporate entities..."

There's never any shortage of DEBT...

You confuse money with debt, the resulting debts, laid at the feet of those not yet born, are onerous!

We started with a law against robbery, you shall not steal,

then over time hundreds of new laws define when you can steal, who can steal, who will benefit, who will pay, one law after another, until one day your Government and the Law have become your enemy!

Wed, 02/10/2016 - 16:08 | 7166597 ATM
ATM's picture

Umm, didn't it happen behind the curtains the first time? I mean the real bail out,not the marketed bailout that they put in the papers.

There are still trillions unaccounted for. Where do you think those went?

Wed, 02/10/2016 - 12:06 | 7165422 caconhma
caconhma's picture

May be Euro collapse is the Zio-Mafia objective. They are now looking for a BIG war instead of endless array of small ones.

Wed, 02/10/2016 - 12:06 | 7165416 JustTheTTIP
JustTheTTIP's picture

Don't think there are enough deposits @ DB for such a maneuver. All the gold the Finanzamt "accumulated" from small to medium sized businesses have long since been sold off into their own private hands. Only this year they started confiscating the belongings of refugees. There aren't many people left to rape.

Wed, 02/10/2016 - 11:52 | 7165365 EscapeKey
EscapeKey's picture

i think we need to dispel with this fiction that Deutsche don't know what they're doing. they know exactly what they're doing.

Wed, 02/10/2016 - 11:58 | 7165386 Haus-Targaryen
Haus-Targaryen's picture

Outed as Marco Rubio.

Wed, 02/10/2016 - 12:00 | 7165391 EscapeKey
EscapeKey's picture

that's too early. i still have to repeat myself another 3 or 4 times.

Wed, 02/10/2016 - 12:58 | 7165748 The9thDoctor
The9thDoctor's picture

"There he goes again!"

Wed, 02/10/2016 - 13:14 | 7165837 Tarzan
Tarzan's picture

Because politicians never repeat themselves, never memorize talking points, and never ever act like alien robots....

Wed, 02/10/2016 - 12:11 | 7165454 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

Here's all you need to know about Marco Rubio:

http://bit.ly/1PNGvFA

Wed, 02/10/2016 - 11:50 | 7165354 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

I'd be an ex-depositer.  Pronto.  Like, within an hour.

Wed, 02/10/2016 - 12:13 | 7165470 Killtruck
Killtruck's picture

GTFOD(B)

Wed, 02/10/2016 - 12:13 | 7165477 holgerdanske
holgerdanske's picture

I would too. The problem is it will be the tax payers that will be forced to pay!

I would be an ex tax payer as in PRONTO!! Like seven years ago!

Wed, 02/10/2016 - 11:52 | 7165359 zeroheckler
zeroheckler's picture

and bailed out by the tax payer

Wed, 02/10/2016 - 11:58 | 7165383 wildbad
wildbad's picture

..FIRST by the depositors .. there is certainly an algo already in place with the taxpayer hook embedded.  the bail-in reserves are a thin oil skin on a barrel of complicated debt.

it wil most certainly go first, but certainly not last.

Wed, 02/10/2016 - 12:07 | 7165431 BandGap
BandGap's picture

Arrogant.Cock.Sucker.

Wed, 02/10/2016 - 12:11 | 7165459 holgerdanske
holgerdanske's picture

“People overreact,” Mack said. “The bank’s name is Deutsche Bank. It’s the German bank. Politically, they will stand up, if they need a safety net, and give it to them.”

 

I remember there was an airline called Swiss Air. It was allowed to go belly up.

Wed, 02/10/2016 - 11:47 | 7165332 BurningFuld
BurningFuld's picture

Ya they have plenty of depositors money to make interest payments with.

Wed, 02/10/2016 - 11:47 | 7165334 KnuckleDragger-X
KnuckleDragger-X's picture

Then they can change the name to Draghi National Bank, since that's where the money will come from........

Wed, 02/10/2016 - 11:47 | 7165336 yogibear
yogibear's picture

Bankster motto: Socialize losses and privatize profits.

Why not throw some more losses to the taxpayer. Their scum.

Wed, 02/10/2016 - 12:13 | 7165474 Igor Viguini
Igor Viguini's picture

that´s the very essence of capitalism

Wed, 02/10/2016 - 13:12 | 7165827 Deathrips
Deathrips's picture

Stop using the internet..competition made most of the technology you use daily available to you.

Communism and socialism/ fascism....what we have now ....is the problem.

 

Didnt communist marx come up with the word capitalist for this reason...to disuade competition(from govt)?

 

Im sure he had great christian intentions...../s/

Wed, 02/10/2016 - 13:27 | 7165905 Tarzan
Tarzan's picture

that´s the very essence of CRONY capitalism!

Because Banks never take credit for losses, only gains.

They win or you loss, either way you loss.

Besides, it's your fault they made bad bets!

Wed, 02/10/2016 - 11:48 | 7165337 medium giraffe
medium giraffe's picture

Spare some change mister? 

Wed, 02/10/2016 - 12:29 | 7165583 SillySalesmanQu...
SillySalesmanQuestion's picture

They'll need a bigger beach pail...

Wed, 02/10/2016 - 11:48 | 7165339 Martial
Martial's picture

Deja Vu, meet Twilight Zone.

Wed, 02/10/2016 - 11:48 | 7165340 NEOSERF
NEOSERF's picture

He's right of course...can't let it get to the point where derivatives get involved so either the ECB or German government will step in shortly as a show of faith with some nominal line of credit and we are off to the races again...that's how it works now.

Wed, 02/10/2016 - 11:48 | 7165342 Dr. Engali
Dr. Engali's picture

Gotta love fascism, privatize the gains and socialize the losses. 

Wed, 02/10/2016 - 11:48 | 7165343 Bangin7GramRocks
Bangin7GramRocks's picture

Smug cunt. (Not wrong though)

Wed, 02/10/2016 - 11:49 | 7165345 Kina
Kina's picture

DB customers refer Greece, don't wait for a long weekend....

Wed, 02/10/2016 - 11:49 | 7165347 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

Fraud.  Everywhere.

I want off.

Wed, 02/10/2016 - 11:49 | 7165348 Baronneke
Baronneke's picture

In other words:  The biggest banks can manipulate, rig and deploy all sort of other criminal activities because the Government (that is: taxpayers) will always have their backs.  

 

Just great !!

Wed, 02/10/2016 - 12:09 | 7165410 mayhem_korner
mayhem_korner's picture

 

 

Ultimately, banks are cream-skimming conduits: they stimulate grossly over-leveraged misallocation of capital, collect the origination and servicing "fees", then return the consequences of the bad decisions to the masses through the "system."  And in the interim, they manipulate the allocations to benefit from the bubbles that are created.

It's a beautiful thing if you are a gutless criminal. 

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