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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ekm's picture

What's the problem with that?

They will collapse faster. It's good.

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:

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?

r00t61's picture

Is this the result of Chinese citizenism?

r00t61's picture

Oh, yeah, I forgot to add:

"Made me laugh."

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

Henry Chinaski's picture

In the real world, paper never beats rock.

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.....

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...


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."


Free Helicopter rides in Kyber Pass for our bankster friends?

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.

swmnguy's picture'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?

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. 


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.

Ghordius's picture

why? I think you are both right

gwar5's picture

Break 'em all up already.

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.  

Carl Spackler's picture


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.






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.

Mr Lennon Hendrix's picture

Wait, so the farce continues?  Damn.

MinnesotaMD's picture

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

schadenfreude's picture

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

AU5K's picture

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

Schmuck Raker's picture

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

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.

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.

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:)

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.

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.

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.

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.

TheGoodDoctor's picture

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

non_anon's picture

bring back Frank-Dodd, not!

Clashfan's picture

that American banks fact.


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

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

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

traderjoe's picture

What you are describing is chaos, not anarchy.

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?

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.

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

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.

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. 

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.



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!

Blkhat117's picture

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

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.

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.

williambanzai7's picture

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

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.

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.