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Deutsche Dumps Dodd - How Germany's Biggest Bank Ran Circles Around The Fed

Tyler Durden's picture




 

Why are we not surprised at the fact, as reported by the WSJ, that Deutsche Bank AG changed the legal structure of its huge U.S. subsidiary to shield it from new regulations that would have required the German bank to pump new capital into the U.S. arm. The bank on Feb. 1 reorganized its U.S. subsidiary, known as Taunus Corp., so that it is no longer classified as a 'bank-holding company'. The technical change has important consequences. Taunus—which at the end of last year had about $354 billion of assets and 8,652 employees, making it one of the largest U.S. banking companies—won't have to comply with a provision of the U.S. Dodd-Frank regulatory-overhaul law that essentially forces the local arms of non-U.S. banks to meet the same capital requirements that American banks fact. A provision of the Dodd-Frank Act was going to require Deutsche Bank to infuse Taunus, which for years operated with thin capital cushions, with what executives feared could be as much as $20 billion. Taunus is no longer a bank-holding company and won't have to comply with the tougher capital rules, even though Taunus still houses Deutsche Bank's U.S. investment bank.

 

While U.S. regulators haven't objected, the maneuvers by European banks to sidestep elements of Dodd-Frank have generated controversy. Some experts worry the tactics will allow the U.S. arms of the European banks to continue operating with thin capital cushions and that their overseas parents won't come to their rescue if they get into trouble. "When an institution becomes stressed, long experience has shown that foreign banks and their regulators are reluctant to send capital abroad to support U.S. operations," said Sheila Bair, the recently departed chairman of the Federal Deposit Insurance Corp. "The only capital that matters is that which is here in the U.S. and can be accessed." But because Taunus is no longer a bank-holding company, it is unclear what jurisdiction the Fed will have to intervene in the investment-banking arm if it has concerns about how the unit is being run or whether it has adequate capital buffers.”

 

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Wed, 03/21/2012 - 23:21 | 2279045 ekm
ekm's picture

What's the problem with that?

They will collapse faster. It's good.

Thu, 03/22/2012 - 00:35 | 2279291 Ahmeexnal
Ahmeexnal's picture

Meanwhile, Beijing goes the way of Mogadishu, as infighting begins between chinese warlords trying to hold on to a larger piece of the shrinking pie:

http://www.washingtontimes.com/news/2012/mar/21/inside-the-ring-436080940/

U.S. intelligence agencies monitoring China’s Internet say that from March 14 to Wednesday bloggers circulated alarming reports of tanks entering Beijing and shots being fired in the city as part of what is said to have been a high-level political battle among party leaders - and even a possible military coup.

 

Chinese black swan about to crash the markets tomorrow?

Thu, 03/22/2012 - 00:49 | 2279336 r00t61
r00t61's picture

Is this the result of Chinese citizenism?

Thu, 03/22/2012 - 00:56 | 2279354 r00t61
r00t61's picture

Oh, yeah, I forgot to add:

"Made me laugh."

"Something something about US citizenism...something something, blah blah blah."

Thu, 03/22/2012 - 05:07 | 2279680 Henry Chinaski
Henry Chinaski's picture

In the real world, paper never beats rock.

Wed, 03/21/2012 - 23:23 | 2279057 AU5K
AU5K's picture

Oh no....  A big bank might fail if the Fed doesn't have oversight over it.  Imagine, a business failing caused by its own bad decisions.....

Wed, 03/21/2012 - 23:59 | 2279192 Assetman
Assetman's picture

Not exactly... the bailout will just be done indirectly via the IMF and Benny Bux' FX swaps.

I only wish I were kidding...

 

Wed, 03/21/2012 - 23:29 | 2279058 ACP
ACP's picture

Moral hazard, meint bitchez!

Edit: So the Germans basically said "The Americans don't give a shit so close to the election, so fuck it."

Wed, 03/21/2012 - 23:24 | 2279062 SHEEPFUKKER
SHEEPFUKKER's picture

Free Helicopter rides in Kyber Pass for our bankster friends?

Thu, 03/22/2012 - 06:27 | 2279723 williambanzai7
williambanzai7's picture

Captain Ben at the helm.

BENNY COPTER

Wed, 03/21/2012 - 23:24 | 2279065 Steve in Greensboro
Steve in Greensboro's picture

Wow. A private entity that is willing to try to actually make money instead of rent-seeking like Berkshire, GE, Government Motors, etc.

Wed, 03/21/2012 - 23:26 | 2279071 swmnguy
swmnguy's picture

But...but...it's not a "Bank Holding Company."  So there's no reason for it to have sufficient capital to withstand the kinds of things that happen to Bank Holding Companies.  I mean, Duh, right?

Wed, 03/21/2012 - 23:32 | 2279092 bankruptcylawyer
bankruptcylawyer's picture

50,000 troops in germany and japan. 

they remain our vassals. if we alienate them we are fucking dumb. 

you think iran is tough? try taking on the ubermentchen without russia. 

 

Thu, 03/22/2012 - 05:23 | 2279690 schadenfreude
schadenfreude's picture

You are a stupid fuck. What, besides the name, is German at Deutsche Bank ? It's a TBTF, just like BoA. I see no difference at all, just the same shit. Half assed regulations, semi professional regulators and banks laughing their ass off.

Thu, 03/22/2012 - 07:00 | 2279750 Ghordius
Ghordius's picture

why? I think you are both right

Wed, 03/21/2012 - 23:32 | 2279093 gwar5
gwar5's picture

Break 'em all up already.

Wed, 03/21/2012 - 23:33 | 2279099 Cdad
Cdad's picture

Nice.  Thousands of pages of documents and countless hours of congressional action to supposedly fix the greatest banking driven crisis ....err...crime wave in American history, and Deutsche Bank dodges it all with a check box.  

Wed, 03/21/2012 - 23:44 | 2279142 Carl Spackler
Carl Spackler's picture

Yes.

Just another in the endless list of faliures by government and government regulators.

The bigger issue is why any of the regulators stil have jobs.

They did nothing to minimize the past financial crisis, and they are doing even less with MF Global, Fannie Mae, Freddie Mac, et al.

 

 

 

 

 

Wed, 03/21/2012 - 23:48 | 2279157 ekm
ekm's picture

I can answer your question.

The reason they have jobs is for the sake of having a job to show in the BLS numbers. It's called communism.

Wed, 03/21/2012 - 23:37 | 2279114 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Wait, so the farce continues?  Damn.

Wed, 03/21/2012 - 23:45 | 2279125 MinnesotaMD
MinnesotaMD's picture

Taunus , what's that German for? The Greeks already know what it is Greek for...

Thu, 03/22/2012 - 05:31 | 2279697 schadenfreude
schadenfreude's picture

It's a mountain range in Germany near Frankfurt, where most banksters have their holiday residences.

Wed, 03/21/2012 - 23:43 | 2279140 AU5K
AU5K's picture

And here I was all looking forward to bailing them out....

Thu, 03/22/2012 - 00:16 | 2279241 Schmuck Raker
Schmuck Raker's picture

Oh, don't worry you'll get your chance. And now it will be costlier.

Wed, 03/21/2012 - 23:47 | 2279156 El Gordo
El Gordo's picture

Odds are they will be managed better than the domestic zombie banks feeding off he blood of the American citizens since they will have to fend for themselves.

Wed, 03/21/2012 - 23:56 | 2279188 rockraider3
rockraider3's picture

That sucks.  Can Dodd at least get his CD collection and Xbox back?  Break-ups are hard, but they can be civil.

Wed, 03/21/2012 - 23:58 | 2279190 Peter K
Peter K's picture

Sounds like the Gemans can't spare an extra 20b. To bad captial requirements can't be satisfied with pledged funds or guarantees:)

Thu, 03/22/2012 - 00:00 | 2279194 steve from virginia
steve from virginia's picture

 

 

Deutsche Bank AG changed the legal structure of its huge U.S. subsidiary ... Taunus Corp., so that it is no longer classified as a 'bank-holding company'.

That means it cannot obtain funds from the Fed's discount window.

Thu, 03/22/2012 - 00:07 | 2279215 rockraider3
rockraider3's picture

Oh please.  In a crisis, you don't think the Fed will let them access the discount window?  The Fed is probably happy DB is throwing off the shackles of BHC status, it's the equivalent of additional monetary easing if they don't have to keep reserves up to US standards.  And in a crisis scenario, the Fed will absolutely bail them out, so no downside to DB.

Thu, 03/22/2012 - 07:45 | 2279817 ExpendableOne
ExpendableOne's picture

They will just back door funds via the main bank in Germany (curtesy of the fed).  

 

Law firms and banking, modern day Janus.

Thu, 03/22/2012 - 10:25 | 2280312 Carl Spackler
Carl Spackler's picture

That means it cannot obtain funds from the Fed's discount window.

Surely, you can't be serious.

The Bundesbank has a balance sheet, as does the ECB.

AND, Ben Bernanke does free currency swap lines with those guys to backdoor fund the liquidity needs of European banks.

Thu, 03/22/2012 - 00:01 | 2279198 TheGoodDoctor
TheGoodDoctor's picture

But they are more than happy to take any fucking bailout money doled out by the Fed? Fuck them.

Thu, 03/22/2012 - 00:04 | 2279203 non_anon
non_anon's picture

bring back Frank-Dodd, not!

Thu, 03/22/2012 - 00:31 | 2279282 Clashfan
Clashfan's picture

that American banks fact.

 

This is the greatest site on the planet, but it sorely needs a good editor.

Thu, 03/22/2012 - 01:49 | 2279441 Vic Vinegar
Vic Vinegar's picture

What kind of music do you like? 

LOL to all your posts to date.  But keep trying, spacemonkey!

Indigo Girls RULE

http://www.youtube.com/watch?v=k0oai2wAj4Q

On topic: anyone here actually read Dodd-Frank?  I tried once and immediately wanted to become an anarchist.  Better to have someone bash my skull in without any legal repercussions than try and figure that thing out.  LOL

Thu, 03/22/2012 - 06:13 | 2279720 traderjoe
traderjoe's picture

What you are describing is chaos, not anarchy.

Thu, 03/22/2012 - 00:33 | 2279285 digalert
digalert's picture

Well well well, remember way back in '08 when GS and MS scrambled to become "banks" so that they would be eligible for the unbeknownst, soon to come le TARP? Will GS and MS now claim that their tentacles I mean arms across the pond are not banks?

Thu, 03/22/2012 - 01:01 | 2279361 Dr. Engali
Dr. Engali's picture

They'll be back, as soon as congress issues the next cash pile. The pigs will squeal back to the trough.

Thu, 03/22/2012 - 01:03 | 2279370 q99x2
q99x2's picture

'The IRS ["in other words: GS - central banksters"] is assembling what Eric Solomon, a director at Ernst & Young, calls a “SWAT team” to crack down on tax evaders.'

KFI Link Here

Thu, 03/22/2012 - 01:09 | 2279374 lasvegaspersona
lasvegaspersona's picture

There is something wrong with DB. In 2010 I had an FX account with them. It had a NY phone number and I sent my $$ to a DB account. They closed suddenly and sent out an email to have funds transferred to another FX company. I missed the date for the automatic transfer and after that I could not reach anyone . I lost over a grand. I tried to deal with the behemoth but got nothing but 'we'll get someone who might know to get back to you". In the end one of the worlds largest banks screwed me out of a thousand dollars plus.  I cant imagine a large legit institution having money sitting in an account and just sucking it up. I could not believe it then anyway. To me this is a sign of the end days  coming.  This huge institution has no concern for its reputation, no concern for the future. Only what it can steal today matters.

This actually happened. I have done business and investing for over 40 years. MFGlobal just confirmed what I already suspected. These institutions don't care about the law, they don't even care about accounting. They suck up money and hide behind their massive size. I'm done with doing business. I have always been a tad too trusting. Now I will not enter into any new partnerships or do business with anyone I don't know personally. There is no reason to trust anyone in todays financial world. Beware.  What happened to Celente is going to start happening to us all. I believe matress sales are about to spike.

Thu, 03/22/2012 - 02:08 | 2279496 q99x2
q99x2's picture

Simon Johnson talked about the lack of enforcement on global banks on the PBS Bill Moyers show in 2009 or so.

Banksters are taking it all down and going to use force, likely brutal deadly and quite possibly explosive warfare, charred wasteland doomsday scenario force. It ain't if. It ain't even when anymore.

So what are people to do. The more time that passes the more likely things will go according to the banksters plan.

Like to be hopeful and don't comment to depress but would like to see some solutions to the free markets only not in the old economic traditions because although the way today is according to the old way of seeing is interesting the perspective is not appropriate.

Perhaps an apocalyptic economic perspective during the current bankster attempt at world domination. 

Thu, 03/22/2012 - 02:14 | 2279511 FXPortent
FXPortent's picture

Das German Engineering Bitchez!

 

It's called circumvention, silly American regulators.

 

But, then again SAT scores are pretty low in Jorsay Shwore America these days.

 

 

Thu, 03/22/2012 - 03:16 | 2279586 CommonSense89
CommonSense89's picture

Exactly, regulators have their heads stuck 3 feet up their asses if they truly believe anyone wont find a semi-legal means of circumvention. And furthermore, that the fix for said circumvention is MORE regulation!

Thu, 03/22/2012 - 02:20 | 2279522 StockMarketBott...
StockMarketBottom.com's picture

How to Spot a Market Bottom

http://stockmarketbottom.com

Thu, 03/22/2012 - 05:09 | 2279682 Blkhat117
Blkhat117's picture

Try to pull $50,000 form your lacal bank and see what happends 

Thu, 03/22/2012 - 05:55 | 2279706 Tom Green Swedish
Tom Green Swedish's picture

No more bailouts Nazis. Good bye. My suggestion UK territories, Ireland, Canada USA and other Nordic States can form a monetary alliance, and leave Europe in the dust. The ECB is totally based on a Gold Standard and its messed up. Ireland might be the only salvagable country in that mess.

Thu, 03/22/2012 - 10:32 | 2280334 Carl Spackler
Carl Spackler's picture

The U.S. will not form a monetary union with the likes of the UK territories, Nordic States, Ireland.

There's nothing in it for Americans, and we're not subsidizing more muppets.

Canada will be the 51st state, as needed.

Thu, 03/22/2012 - 06:15 | 2279722 williambanzai7
williambanzai7's picture

That's Ok we bailed them out of AIG so they don't need to comply with anything.

Thu, 03/22/2012 - 09:11 | 2280039 Aunty Christ
Aunty Christ's picture

Over $350B of assets makes them a systemically important financial institution ( SIFI) and they will remain under the Fed's supervision. Taunus will have to raise capital by deleveraging and/or equity issuance.

Thu, 03/22/2012 - 09:38 | 2280139 Chicago bear
Chicago bear's picture

Robert Khuzami advised DB on how to avoid Dodd Frank and also how to avoid the future implications of a US sovereign crisis stemming from the certain future US banking crisis. He deserves the medal!

Remember from ZH 4/2010:

The incest continues: the WSJ has informed that the SEC's chief investigator, Robert Khuzami, used to be general counsel for Deutsche Bank, and presumably reviewed numerous CDO-related transaction, while on the "other side" of the wall. "As part of that job, he worked with lawyers who advised on the CDOs
issued by the German bank and how details about them should be
disclosed to investors. The group included more than 100 lawyers who
also defended the bank against lawsuits and vetted other financial
products, these people said." The good: he probably knows more about CDOs than any other person in government administration history, and thus would not have brought on the Goldman case without being aware of all the potential tripwire nuances (and yes, if the Goldman case gets to the discovery stage, which it will, it is game over for Goldman's defense strategy, which means settlement and/or much worse). The bad: who knows how many Deustche Bank CDO's of comparable or worse nature he allowed to see the light of day. The most interesting: "Because of Mr. Khuzami's old job and his financial interest in the
company, he has recused himself from any matters related to Deutsche
Bank, according to an SEC spokesman." With Greg Lippmann's (legendary head of CDO trading at the German firm whose assets are greater than all of Germany's GDP) recent sudden departure, and the SEC being prevented from bringing CDO-related charges against the bank (for the time being), is DB currently actively cleaning up its tracks? After all the firm was one of the top 3 CDO issuers in the period under consideration.

Thu, 03/22/2012 - 10:10 | 2280259 Sandmann
Sandmann's picture

foreign banks and their regulators are reluctant to send capital abroad to support {U.S}. operations

 

Yes London noticed that Lehman Bros. in London had its accounts swept to New York before filing bankruptcy.......not a lot was injected to meet payroll

Thu, 03/22/2012 - 11:01 | 2280407 BlackholeDivestment
BlackholeDivestment's picture

 

 

                                           Neo Deutsche Bag

                           http://www.youtube.com/watch?v=xQDcNzD3s6k      

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