"It Cannot Be Allowed To Fail": Germany Pursuing "Discrete Talks" With The US Over Deutsche Bank

Tyler Durden's picture

So much for last week's rumor of an imminent reduction in the DOJ $14 billion settlement, which sent the price of DB soaring, and propelled the global stock market higher.

Moments ago, Reuters reported that the German government is pursuing "discreet talks" with U.S. authorities to help Deutsche Bank secure a swift settlement over the sale of toxic mortgage bonds.

German officials have, until now, played down their role in the standoff, saying it is up to Deutsche to work out a deal with the DOJ, which is demanding $14 billion to settle RMBS misselling claims. But now it has been confirmed that Berlin government officials are hoping to "facilitate a quick deal that would buy Deutsche Bank time to regain its footing."

One senior government official told Reuters there was "contact at all levels" between German and American officials. Another source said Finance Minister Wolfgang Schaeuble was not planning to meet DOJ officials during a trip to Washington this week for International Monetary Fund meetings, but added: "You can hold talks. It doesn't have to be the minister."

Admitting also that, as has been widely known, Germany would not let DB sink, Reuters adds that "officials recognise that Germany's biggest bank, which employs around 100,000 people, cannot be allowed to fail."

However, there is a time constrain as the resolution of the crisis through a prompt - and reduced - settlement is crucial for Chancellor Angela Merkel, who faces a federal election next year. It could be "political poison" for her government to rescue a bank that got into trouble through speculating. Which is why Berlin has been hoping that the US will endorse a near-term settlement, somewhere well below the original $14 billion ask.

While most of that is known, one of the sources said that the ideal solution for Germany in the longer term would be a merger between Deutsche and its smaller domestic rival Commerzbank, "even if it would be better to wait several years until both banks were cleaned up before sealing such a deal."

Berlin has previously declined to comment on the topic of bank mergers. The official's comments about an all-German tie-up mirror the view of others in Berlin who spoke to Reuters on condition of anonymity, although it is unclear whether they represent official policy in the Chancellery. "We are not Austria," the official said. "We are the biggest economy in the European Union, one of the world's leading exporters. We need a big bank with a European and international presence but which is anchored here in Germany."

Another option is merging Deutsche with a European rival, but "only if Germans controlled the combined entity."

Meanwhile the political posturing over a potential DB bailout continues: comments on Sunday from Economy Minister Sigmar Gabriel, a Social Democrat, accusing Deutsche of making speculation its business, were a signal that Merkel's opponents will not hesitate to use the Deutsche issue to score political points.

"The German government would face stiff opposition if it decided to help Deutsche Bank," said Joerg Rocholl, president of the ESMT business school in Berlin and member of an economic advisory board to the German finance ministry. "I would expect opposition parties to seize on this in a massive way to question the credibility of the government in the run-up to the federal election next year," he added.

The German public is likewise against a rescue: in an Emnid survey for Focus magazine on Saturday, 69 percent of those polled opposed state aid for the bank, with 24 percent in favour. Lawmakers in Merkel's Christian Democrats (CDU) have said they do not want to see the government jump to Deutsche's aid.

"Deutsche Bank caused these problems itself," said Eckhard Rehberg, a budget expert in the CDU parliamentary party. "At the present time, I rule out capital assistance."

There is just one small problem: Deutsche Bank holds over half a trillion euros in deposits on its balance sheet, which means that if push comes to shove, Germans will be begging for a bailout just to have access to their savings.

So why the secrecy in negotiations? Reuters concludes that as the German government considers its next moves, officials say that a number of previous cases involving European firms and U.S. authorities are shaping its approach. In pushing for a settlement with the U.S. DOJ, Berlin is opting for a discreet approach, in part because it saw how France's aggressive public lobbying several years ago against a $9 billion fine imposed on BNP Paribas for violating U.S. sanctions against Iran, Cuba and Sudan seemed to backfire.

Which means that the fate of Deutsche Bank is, at this moment, in the hands of Obama, and while he will certainly relent and not push Europe into a full-blown banking crisis, Germany will "own" the US for the foreseeable future.

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MANvsMACHINE's picture

All talks will be kept private.  Just thought you'd like to know.

eforce's picture

If US lets them fail, they can 'absolve' themselves of blame.

EscapeKey's picture

a merger between two royally fucked institutions? jesus fucking christ, so the world can collapse even faster and harder when eventuality comes to fruition?

knukles's picture

What!   I get to bail them out again?!?!?!?!?!
Fuck, just merge 'em with Citibank and .....

Oh, never the fuck mind.

Stop the Madness 2016

Bokkenrijder's picture

Merkel over a barrel, and Obama and Hillary are aiming for penetration! Eeeew!

kliguy38's picture

Too late Angela.......they have you targeted for extermination

Au_Ag_CuPbCu's picture

If it's too big to fail, it's too big!

American Psycho's picture

Owe, the Chinese own us. 

lance-a-lot's picture
lance-a-lot (not verified) American Psycho Oct 5, 2016 7:48 PM

The SAUDIS are withdrawing their $ following Congress's stupid Sept 11 Bill. https://goo.gl/oehIgG

Bush Baby's picture

Germany's Trump card is either the USA drop the fine or Germany lets DB temporarily crash to a  3 handle and the market tanks.

Which means Trump wins, so they got Obama bent over.

Look for a settlement within a few days.



0b1knob's picture

Does anybody at this point really trust the Germans?   Just a week or so ago Merkel swore there would be no bail out for DB, now they have multiple bail out plans.

I think DB will be "saved" in the same sense that people who arrived at concentration camps got "showers".

zvzzt's picture

Or, "we lower the fine and you guys stop being so friendly with those pesky russians". Remember, we the US can print money to buy up stocks and you 'conservative nitwits' at the BB and ECB cannot


researchfix's picture

Good thing is, either way we get closer to the truth. Closer to the end.

American Psycho's picture

This is the media / ECB put.  Damn DB should be in the single digits.

auricle's picture

The .gov doesn't want to appear soft on bank crime by reducing the fine. Janet will just print and give them the money to pay the fine. 

Lynx Dogood's picture

"they have you targeted for extermination"

There is a very good chance that you are correct!

Pairadimes's picture

In this currency regime, all banks are doomed to fail. It is the debt-based, partial reserve banking, fiat currency model that is failing. The first casualties will be the private banking concerns. Propping them up just hastens the end of the central banking fiat currency model that is destroying first world economies. 

Hedge accordingly.

putaipan's picture

seems as good a place as any to dump this ...

i'll take a dulford dump over an assange dump any day-


Librarian's picture

Huh... Deja vu...

"...all over again."

-Yogi Berra (1961)

TBT or not TBT's picture

Bammy will bail them out IF they double their intake of islam infected third world savages.   Dar el harb 'em till they're done, that's what the pedophile prophet wanted.  

knukles's picture

I wrote several times here this last week or two with what's happening with DB, that you all watch what happens with "Currency Swaps" and "Other Asset" categories/line items on the Fed's Balance Sheet.
Bailin' everybody out, again.
Well, shit like this makes the US$ supreme.

Must Have Turmoil to Fear the Plebes into their (Fake) Voting (As If It Mattered) but Sure Would Be Easier to Really Elect The Establishment Candidate, Wouldn't It?

Shit like this's gonna end in piles of dead bodies.

Bay of Pigs's picture

We slaughtered some folks...

TheMeatTrapper's picture

I think we should merge all the banks into one big giant bank. We could call it "Carl's Big Ass Bank". You could also get Carl's Big Ass fries with every order.

SomethingSomethingDarkSide's picture

Nothing surprises me anymore - we're willfully strolling towards communism.

TBT or not TBT's picture

Admittedly, its a little Rorschach-y, but it looks more like fascism to me.   See, what we have is the state and state established central banks ordering large private organizations around.  Those that play ball live.   Those that play ball well get a hand in how their industry works.    Communism would make every DB employee a government employee, and every DB asset a government asset.  

Kabissa's picture

guess " - "   x   " - "   =   " + " in their mathmagics...


Stroke's picture

The US Fed will own a 14 billion dollar stake

Omerta's picture

Private circle jerk more like it-

Kirk2NCC1701's picture

Germany, let DB fail!  You'll do better with the DEM, than the USD will do after the Crashmaggedon of fiat chits.

wisehiney's picture

Hitler smiles from hell.

He left the DB mass destruction and also his spawn hitlery for us.


knukles's picture

Started right after WW2 by a buncha Nazis.
Yep.  Afraid that the Muzzies they've imported'll stop 'em from doin' the Fourth Reich.

Ha ha ha ha ha

Seriously.  It's Evil Shit, People.
Nullification of All Natural Laws in Favor of the State.
We're at a precipice.
Don't ask me what happens, but I know it's not gonna be necessarily good as we ain't even seen Mr Diebold, yet.

bankbob's picture

DB to DOJ - "Will you accept gold teeth?"

Stan522's picture

So......., is it on again, or off again and who foots the bill....?


The US taxpayer........

J Jason Djfmam's picture

The US taxpayers children, grandchildren, great grandchildren.....

bjax's picture

Either you join the war in Syria, and we will give you the bail out. Or your country goes tits up. Your choice.

buzzsaw99's picture

send black diplomats. the doj hates whitey.

rlouis's picture

Max, lower the cone of silence.

ANestIOS's picture

do not let the narrative shifting towards the DoJ fine being the issue fool you - this is not about toxic DB in 2008, this is toxic to the tune of trillions DB now

DetectiveStern's picture

I heard a rumour Bono and Bob Geldof are planning a charity concert to raise funds to save Deutsche.

J Jason Djfmam's picture

dd "Just thank God it's Douche Bank and not you". bb

DetectiveStern's picture

Do they know it's bonus time at all

WorkingPoor's picture

Does anyone REALLY think that even one pfennig of this fine is actually going to be paid?




Silver stacker

NRA member

ARRL member

E-Signatory, Mount Vernon Statement of 2010

permanent member of every socialist's "enemies" list

DetectiveStern's picture

The SEC should sell a CDO made up of payments to fines they've issued. 

HalinCA's picture

Nahhhh ... they will settle for the German gold still in the NYFRB

Whoa Dammit's picture

Fuck it. Just make every country except Russia a state and make the taxpayers of the original 50 pay for it all. That's what its coming down to anyway. I am so tired of paying for rich people who have fucked up to stay rich its not even funny.

Yen Cross's picture

   Are you kidding me?

 While most of that is known, one of the sources said that the ideal solution for Germany in the longer term would be a merger between Deutsche and its smaller domestic rival Commerzbank, "even if it would be better to wait several years until both banks were cleaned up before sealing such a deal."

 The sheer level of incompetence and denial is beyond reproach. To even suggest merging two fucked-up banks into an even larger monopolistic crony comglomerate is sheer lunacy.