We don't want to shock anyone, but we have - on occasion - written a handful of borderline negative things about Deutsche Bank.
For some time now, it has been apparent to us that something was wrong at the German lender, considering that it was hemorrhaging money and talent, wracking up historical pay-outs of seemingly endless fines, cancelling bonuses, laying people off by the legions before taking a gulp of air and then doing it again. And we couldn't help but notice how it performed unspeakable acts of mental torture on its former CEO before publicly putting him down in the messiest example of professional euthanasia that we have ever seen.
It's no secret to us that Deutsche's US operations are the banking equivalent of that kid in school who you worry about because he smells weird, mumbles to himself and spends lunchtime poking at something along the fence-line of the schoolyard. But even we were kind of shocked to see the latest news on Deutsche this morning...
The Federal Reserve has designated Deutsche Bank AG’s sprawling U.S. business in “troubled condition,” a rare censure for a major financial institution that contributed to constraints on its operations, according to people familiar with the matter.
As they say in the woods of Bavaria; "Yowza."
Being "Troubled" is the Fed's version of "Double Secret Probation," a designation that allows the government to step in and say "You know this multi-billion dollar financial giant that you're running? Yeah, well, you're fucking doing it wrong."
The Fed’s downgrade, which took place about a year ago, is secret and hasn’t been previously made public. The “troubled condition” status—one of the lowest designations employed by the Fed—has influenced moves by the bank to reduce risk-taking in areas like trading and lending to customers.
It also means the bank has had to clear decisions about hiring and firing senior U.S. managers with Fed overseers. Even reassigning job duties and making severance payments for certain employees require Fed approval, the people said.
According to the WSJ, the Fed classification also puts Deutsche on the FDIC's dreaded "Problem banks" list, a register best-remembered for how swollen it got with community banks after the subprime crisis. And while it's really hard for anyone to talk openly about a confidential regulatory nightmare, Deutsche gave it a shot with The Journal:
A Deutsche Bank spokeswoman said the bank doesn’t discuss “specific regulatory feedback.” She said that Deutsche Bank AG, the parent company, “is very well capitalized and has significant liquidity reserves.” The relevant U.S. subsidiaries are “DB USA Corp, Deutsche Bank Trust Corporation, and Deutsche Bank Trust Company Americas, our principal U.S. banking subsidiary, which has a very robust balance sheet as disclosed in our annual and quarterly regulatory filings.”
Yeah, balance sheets are dope and all, but we have to believe that, when it comes to Deutsche, the Fed is more worried about things like capital buffers at this point considering what a schieße-show has broken out inside Deutsche's US operations. And speaking of DB's capital buffers:
Welt, meet schmerz.
But if you're wondering how things are being felt inside Deutsche Bank USA, let's just say that it doesn't appear the bank has lost its understated sense of humor.
The bank spokeswoman added: “We have previously indicated that our regulators have identified various areas for improvement relating to our control environment and infrastructure. We are highly focused on addressing identified weaknesses in our U.S. operations.”
We hate to say it, but looking at what the last few years have wrought, one has to ask; Is the best way to identify the weaknesses in Deutsche Bank's US operations to not have Deutsche Bank operating in the US?
That said, if Christian Sewing pulls his desperate German bank out of the United States of America, who will lend money to our president?