Deutsche Bank And The Global Financial Crisis
- Deutsche Bank And The Global Financial Crisis
by Nick Beams, http://www.wsws.org/
Deutsche Bank’s shares plunged to record lows this week, sparking talk of a government bailout to avert a new financial crash. The turmoil surrounding Germany’s biggest bank demonstrates that all of the contradictions of the global financial system that led to the meltdown of 2008 are once again erupting. Now, however, these contradictions are fuelling and intersecting with economic and political tensions between the major powers. These geo-political conflicts are, in turn, intensifying the financial crisis.
The financial position of Deutsche Bank has been of concern for a number of years, with the International Monetary Fund saying last June that it appeared to be “the most important net contributor to systemic risks in the global financial system.” But the immediate cause of the present crisis was political.
After a protracted investigation, the US Department of Justice moved last month to impose a $14 billion penalty on Deutsche Bank for fraudulent practices in relation to the US sub-prime mortgage market in the lead-up to the 2008 crisis. Both the substance of this decision and the circumstances surrounding it indicate that it was a calculated move to hit Germany’s only major international bank.
The decision was leaked to the Wall Street Journal,rather than being discussed behind closed doors so that a private settlement could be reached. It emerged in the midst of rising tensions between the US and the European Union, particularly with Germany.
Following the EU decision to hit Apple with a €13 billion back tax bill—a step that met with trenchant criticism from US government and corporate circles—the Justice Department move in relation to Deutsche Bank was widely regarded in European circles as payback. Tensions over the Apple penalty and its implications for US investment and profit-making in Europe had been compounded by the virtual scuttling of the US-sponsored Trans-Atlantic Trade and Investment Partnership by Germany and France.
The Deutsche Bank share plunge was halted on Friday, at least for now, on the back of news that the US was prepared to lower its fine to $5.4 billion. This, however, will prove at most to be a short-lived ceasefire in an ongoing economic and financial war.
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