Germany’s banking system is one of the worst in the world, according to Paul Gambles, managing partner at advisory firm MBMG International, who told CNBC that Deutsche Bank is over-leveraged and is an accident waiting to happen.
Responding to German retail sales data, which showed a surprise rise of 0.8 percent month-on-month in May, Gamble said that Germany was the key problem with the euro zone project. German exports to the rest of Europe ensure that it remains the profitable powerhouse of Europe, but that wealth is then transferred back to the struggling periphery through bailout agreements.
Back in November of 2008, among other times, I noted that European banks have much higher leverage than our banks, and far worse “transparency.” To put it bluntly if our large banks are insolvent on a mark-to-market basis (and I believe they all are) those big banks over in Germany and elsewhere are smoking craters by comparison.
So five years later on CNBC publishes this? Hoenig says that DoucheBank’s capital levels are “horrible” and suddenly it’s news?
Why wasn’t it news in 2008 when I was talking about it, along with a handful of others?
Oh that’s simple — never talk about the ticking financial nuclear device on the desk.
Especially when it’s sitting on your desk.
“To say that we are undercapitalized is inaccurate because if you look at the Basel framework, we’re now one of the best capitalized banks in the world after our capital raise,” he told Reuters.
So let’s see, we’ll put all the derivatives on an exchange, we’ll mark-to-market everything every night with no hinky games and nothing kept “off-sheet”, we’ll stop counting sovereign credits (or anything else) as “zero risk” (because it’s not) and then we’ll see how the margin numbers look and figure out whether you have enough capital to cover that.
Anyone care to bet on the outcome of such a little exercise?
I didn’t think so.