It’s Official! Deutsche Bank Getting Bailed Out

by Chris

Well, nothing is official until it’s deined…or bailed out.

Now, to be clear, Deutsche Bank is *not* being bailed out…it’s just that the state of Germany may become the largest shareholder and a merger is being “orchestrated” (sound like 2008 anyone?).

Germany Willing to Merge Deutsche Bank, Commerzbank, Focus Says

The German finance ministry is willing to “orchestrate” a merger between Deutsche Bank AG and Commerzbank AG, according to Focus magazine.

Various scenarios have been discussed, including one in which the German state would become Deutsche Bank’s largest shareholder for about five years before merging the two banks, Focus reported without saying how it got the information.

Alternatively, Deutsche Bank could raise money from German industrial companies to buy Commerzbank. Another option discussed in the finance ministry has been creating a holding company that would own stakes in both banks, according to the report.

Representatives for the finance ministry, Deutsche Bank and Commerzbank all declined to comment.

German Finance Minister Olaf Scholz has repeatedly said that the country needs strong banks for its export-oriented economy. A merger between Deutsche Bank and Commerzbank to achieve that goal has won the backing of Berlin, people with knowledge of the matter have said.

They’re still trying to figure out who the bagholders…er…”investors” will be in this emerging disaster, but one party potentially on the hook is the usual bagholder – the German taxpayer.

The mealy-mouthed language of “Germany needing strong banks for its export oriented economy” is pure palaver.  Instead we need to flip the statement, what Germany does not need is a failed mega bank.

What ought to be asked here is why DB is failing in the first place, not asking how the German people can be placed on the hook for the prior failures of DB management.

But here we are.

This story has everything – a denial, a lack of comment, several floated trial balloons to test the scenario waters.

In other words, the sinking share price of DB has been telling the tale.  DB is toast.  All that’s left to figure out is the only relevant question ever; who’s going to eat the losses?

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