Deutsche Bank's pan-European bail out

As I have been writing about Deutsche Bank since 2012 as an alleged criminal enterprise that had a number of bankers associated with it mysteriously die in suicides, I can’t say I am surprised by the events recently.

And recent market moves on its stocks and bonds show the bank is in bigger trouble than Germany can handle.

  • On Tuesday Deutsche has a market cap of $16B, just above the $14B amount the Justice Department is looking to claw back in fines as a result of peddling fraudulent mortgage paper.
  • And the short interest on the bank is growing. The total number of Deutsche shares out on loan rose from 1.72 per cent of its issued shares to 3.07 per cent over the past week, according to data from Markit, as Deutsche has seen its shares fall 55 per cent in the last year.
  • It’s CoCo bonds — contingent capital bonds — issued earlier this year, to bring in some much-needed capital, are trading well below par. The last price I could find was $0.77 on the dollar in July.

So for German leader Angela Merkel to say Deutsche will not get a government bailout tells me one thing. She is putting the ECB and Mario Draghi on notice that this is their tar baby. You want negative interest rates, which cripple banks, then you bail out Deutsche.

All of Europe will need to prop up this bank, because Germany can’t do it alone, especially with upcoming elections next year.

I would go so far as to say Janet Yellen and the Federal Reserve will be part of the bail out as pressure mounts.

Just like in 2008 when Deutsche was one of the global banking firms getting easy money from the Fed after Lehman Bros.’s collapse.


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