There is a very real possibility that Deutsche Bank is going down.
If the most prominent bank in Germany fails, the effect on Europe will be profound, and I don’t think the United States will escape the effects. The ripples will turn into a tsunami as they travel across the Atlantic. Already, the bank’s troubles have stressed the American stock market.
Angela Merkel has stated that Deutsche Bank will not be getting a bailout from the European Central Bank – the lender of last resort for European banks.
The Department of Justice recently issued a $14 billion fine to the bank to settle a mortgage-backed securities probe…and the bank has no intention of paying.
“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited,” the company said in a statement early Friday in Frankfurt. “The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts.”(source)
Deutsche Bank shares fell alarmingly this morning on the news that Merkel won’t support the bank.
Deutsche shares fell as much as six percent to €10.67 in early Monday trading, the worst performance since 1992.
The bank has lost over 52 percent of its value since January and over 56 percent in the last twelve months. Earnings per share fell as much as €6.
The collapse has been prompted by a report in the German magazine Focus that said Chancellor Angela Merkel has ruled out any state assistance for the bank next year.
Merkel also declined to provide help to Deutsche Bank in its legal battle with the DoJ. The Frankfurt-based lender may be fined up to $14 billion over its mortgage-backed securities business before the 2008 global crisis, the magazine reported. The article said Merkel made her views clear in talks with Deutsche CEO John Cryan. (source)
Could Germany be considering a bail-in instead of a bail out? Is this why Germans have been told to stockpile food and cash in case of a disaster hitting the country?
According to Investopedia:
A bail-in is rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their holdings. A bail-in is the opposite of a bail-out, which involves the rescue of a financial institution by external parties, typically governments using taxpayers money. Typically, bail-outs have been far more common than bail-ins, but in recent years after massive bail-outs some governements now require the investors and depositors in the bank to take a loss before taxpayers.
Are millions of Germans about to see their cash stolen by the government to prop up Deutche bank?
It’s happened before. The Bank of Cyprus took almost 40% of depositors cash to keep the bank afloat and there was nothing they could do about it. Assets were frozen and ATM machines were not refilled. (source)
Is this what’s ahead for the people of Germany? As I said just a month ago:
We’ve seen this before.
If you’ve been following collapses around the world for the past few years, you know that right before all heck breaks loose, the government issues a half-hearted warning along the lines of, “You’re on your own now.” But by then, it’s already too late. People who try to prepare after the government tells them to will be dealing with limited supplies as everyone else tries to get prepped too.
Will Germany become the next falling domino in the collapse of the Western world?
The lesson that we can take from this is that being prepared far in advance of a collapse is the wisest course of action. If you stock up on emergency food, water, and other vital supplies before the crowd, you’ll do so at better prices with better options. Last summer, our own government issued 2 warnings to the American people to get prepared, but very few people took it seriously.
Don’t wait until it’s too late.