Michael Lewis’s tour of Europe lands him in Germany this week, where he writes an unbelievably raunchy epic and relies on an elaborate metaphor to justify some sightseeing that Tabitha Soren might not otherwise approve of:
The Hamburg red-light district had caught [anthropologist Alan] Dundes’s eye because the locals made such a big deal of mud-wrestling. Naked women fought in a metaphorical ring of filth while the spectators wore plastic caps, a sort of head condom, to avoid being splattered. “Thus,” wrote Dundes, “the audience can remain clean while enjoying dirt!” Germans longed to be near the shit, but not in it. This, as it turns out, was an excellent description of their role in the current financial crisis.”
We are not the only ones to find this metaphor a little strained. In any case, when he’s not looking for shitshows of the literal variety, he’s in town to try to figure out why German state-owned Landesbanks lost so much money on subprime CDOs peddled by American banks:
Take your money and go play Keno with Grandma– nothing to see here. Read more »
Here in the United States, David Hasselhoff is seen as the guy who gets drunk and eats cheeseburgers off the floor. To put it mildly, he doesn’t get much respect. Over in Germany, however, he’s the second coming of Christ and is treated like a prince. Until recently, Vikram Pandit never knew what it felt like to be loved and hated in equal measure, and didn’t really understand how hard The Hoff had it. Yesterday, at the G20 Summit, however, he hinted that he’s starting to relate. Read more »
He added that he’s just messing, “of course,” but seriously, think about it. Dare to dream. We can do this. And then together, we will dance. Read more »
France is none too pleased with Germany’s unilateral action yesterday to ban bearish bets on certain financial companies and European government’s bonds. Christine Lagarde, the French finance minister blasted the Germans for stepping out of school yesterday, a move she thinks could dampen liquidity on the European bond market.
Lagarde has ruled out imposing its own ban on naked shorting, however it is still enforcing a ban on shorting certain financial stocks that was put in place in September 2008. Sweden and the Netherlands also came out against the Germans yesterday.
“I think we should really request the views of those governments affected by this measure. We did not envisage doing this. And for liquidity reasons, it is useful to continue functioning without banning short selling,” she said.
Backlash builds against German ban [FT.com]
In the UK, record their cell phone calls. In Germany, treat them like the terrorists they are. By tailing their cars, and going through their trash.
Germany’s Finance Minister Wolfgang Schaeuble told the Bundestag on March 16 that the country may have to consider ordering “intelligence agencies to set up surveillance of who is getting together with whom for which kinds of speculative processes, and where” to protect the euro.
Read more »
The English speaking world has paid a lot of attention to the failures of Northern Rock, Countrywide and all the Wall Street institutions that have had to seek capital infusions to stay afloat in recent months. But the situation in Germany is arguably even worse. The public banks–state owned, partially state owned or dependent on public sector funds–have run into such trouble that one of the key pillars of the banking system is threatened, according to Wolfgang Reuter’s article in Der Spiegel.
“The state-owned banks are supposed to bail each other out when necessary, but the problem is that many are in trouble themselves and hardly in a position to help their peers. And things could get even worse,” he writes.
Why are Germany’s banks in such trouble? Reuter cites a “fatal mix of amateurism, greed and political protection” but what it really seems to come down to is moral hazard. Aware that they were walking a tight rope with a safety net to catch them if they stumbled, the bank managers took irresponsible risks.
Ironically, however, it was the end of state protection, required by the European Union, that sparked a huge push into the riskiest securities.
“In the days of government backing, they were able to borrow money at lower rates, which in turn allowed them to offer loans at lower rates than their private competitors. But that advantage ended in 2005, Reuter writes. “Hard up for funds, many of the public-sector banks began speculating with high-risk securities. According to a former bank executive, many ‘literally stocked up on these investments’ shortly before the cut-off date.”
Enter subprime, and you see exactly where this is going.
German State-Owned Banks on Verge of Collapse [Der Spiegel]