Thursday, September 29, 2016
What's German for Schadenfreude?
So Zerohedge is all aflutter about Deutschebank's systemic risk, and how it's Lehman all over again.
Except that 2008 was a general run caused by systemic mortgage origination fraud, while DB shares are dropping because of news that they have to pay a fine. Oh, and ten hedge funds moved money out of DB.
This is the same Russian-sponsored propaganda website, of course, that says Reuters is part of a conspiracy to give Clinton inflated poll numbers.
Anyway, Frances Coppola's also waded in, but you don't have to read that article either, since she usually doesn't know what she's talking about, and anyway Forbes expects you to allow over a dozen fucking third-party scripts to view their website.
The basic idea is:
1) Deutsche doesn't (effectively) have $14B.
2) Germany won't bail them out because reasons.
3) thus their shares are going to $0.
4) so they can't raise capital by share dilution, so they'll have to bail in creditors, which causes a systemic hypercollapse.
Which is all fine, except steps 1-4 are all utter horseshit.
Germany certainly can bail out DB. Yes, they've spent the past 5 years insisting that EZ governments aren't allowed to use taxpayer money to bail out their banks, but we know that that rule only applies to swarthy Mediterraneans. Coppola says it'd be "hypocritical" for Germany to bail out Deutsche: I retort that she obviously hasn't met a German in her life, because if it's one thing Germans love to be it's hypocritical.
Will a bailout kill the EZ's existing bank policy? Yes. But it's stupid anyway; it deserves to die. Anyone with sense knows that: just not Weidmann or Schauble.
But all that is moot anyway. The way I'd fix this, if I was the American in charge of collecting the fine, would be to offer Deutsche a payment schedule: say, $1.4B/y for 10 years, plus interest at half above prime.
Deutsche can certainly pay that and stay liquid, since they lose that much money a year on outright management stupidity and gross trading incompetence anyway; Merkel wouldn't have to bail them out; the EZ bank resolution mechanism would stay alive to continue destroying the Mediterraneans; the US gets to book the fine; and, best of all, Deutsche spends the next ten years limping around the banking system like a fat Irish asshole who got kneecapped for picking a fight with the wrong crowd.
And that last bit would be a great way to enforce compliance in the rest of the world's banking system. Cripple the fuckers for ten years and suddenly all the other banks will start paying attention.
But what'll probably happen instead is Merkel will bail them out with German taxpayer money, probably taken out of infrastructure spending and welfare payments; but not before their share price collapses, because after all if it's one thing Germans don't really do it's act promptly when a crisis hits, because it takes so long to pull such big, square heads out of such tight, constipated asses.
After that, she'll insist that yes, no other country is allowed to bail out their banks, just Germany, because they're special.
That's my bet.
In any case, quit piddling your fucking panties, everyone. This isn't Lehman, there's no trillion-dollar mortgage origination fraud.
Quit getting your fucking news from ZH.