German Banks Could Hemorrhage 70 Billion Euros

Spiegel ^ | March 28, 2008

[DeaconBenjamin]

The fallout in Germany from exposure to America's subprime crisis may be far bigger than previously feared. One major newspaper puts estimated losses at a whopping 70 billion euros, while a prominent politician warns that the US recession has already arrived in Germany.

German banking executives fear the current financial crisis is quickly shaping up to be the worst since 1929. Friday, Bild newspaper cited banking insiders who predict that total losses at German banks from the American subprime mortgage loan crisis could hit the €70-billion ($111 billion) mark.

The paper reports that Germany's banking supervisory authority BaFin has calculated the total volume of high-risk investments made by the country's banks. "Now we have an overview of what's going on," a BaFin spokeswoman told the newspaper. "The figures are reliable." The agency, however, is keeping the data classified.

On Friday, Bavarian governor Günther Beckstein said the state's BayernLB bank would announce losses related to the credit crisis of up to €4 billion -- double the €1.9 billion figure the bank had previously disclosed.

Bild also reports that state-led bailouts will continue for German banks hit hardest by the subprime crisis. The country's third-largest regional bank, WestLB -- which has been kept alive with injections from the state of North Rhine-Westphalia -- will soon require an additional €2-billion lifeline. Meanwhile, IKB Deutsche Industriebank AG bank,which has already received a billion-euro bailout, will be draining a further billion euros from the public purse, bringing its total rescue package so far to €8 billion. Globally, the Bank for International Settlements reports that banks had already written off losses to the tune of €150 billion by the end of January.

"The American recession will definitely arrive," Michael Fuchs, an economics expert for the conservative Christian Democrats, told Bild. "It's already virtually here."

[DeaconBenjamin]

I edited the excerpt to include as much information as I could.

[Question Liberal Authority]

A bank crisis in Germany? What’s the worst that could possibly happen?

[oneolcop]

CLUNK

Thats the sound of another piece of our inextricably linked world economic system falling off. This could get really ugly real soon.

[BeckB]

I had wondered if it wasn’t alxo some foreign banks that were speculating and fueling the subprime frenzy. Let them exploit some other country.

[wideawake]

The German banks, the German press and the German political establishment are doing a pretty good job of convincing people that it is America's fault that Germany's banking system - with its secretive reporting system, lack of internal controls, amateurish portfolio management and almost-total ban on disclosure - is in trouble.

[Question Liberal Authority]

George Soros made his fortune by manipulating the political and economic systems of several small countries. But of course, everyone knows that he would never try that with the United States.

[jiggyboy]

According to this link, Germany is the fifth-largest economy in the world, with a yearly GDP of $2.8T. $111B in losses would be about 4% of a year’s GDP.

4% of the US’s $14T GDP would be about $550B, which would be more than twice the subprime-related losses admitted to so far.

http://useconomy.about.com/b/2008/02/12/us-no-longer-worlds-largest-economy.htm

[Chode]

so, did the German banks make bad investments in America or did they make their OWN BAD LOANS???

if they made their OWN bad loans... i don't see how they can blame it on US.

[wideawake]

What’s the worst that could possibly happen?

Even if Germany had the political will to leave NATO and the EU and go to war against both, it could summon less than half the effective manpower that Hitler was able to. The average German today is almost 20 years older than the average German of 1940.

[wideawake]

A good question. The real estate market in Germany is as overheated now or more so than the US market was in 2006.

[Battle Axe]

If there are to be true losses, then someone will have to start selling these foreclosed upon houses at less than what is owed. Right now they are just sitting there empty.

That in itself is a small loss, no interest coming in, but they are still holding the dollar amount owed.

Is there a part of the country where they are starting to sell the homes for what they can get???????

[GOPJ]

George Soros made his fortune by manipulating the political and economic systems of several small countries. But of course, everyone knows that he would never try that with the United States.

Yeah, he doesn't hate President Bush soooooo much that he would wreck the US economy ( while making billions) to assist Obama getting in the White House.

[Travis McGee]

Ping

[RC2]

The key here is that we don’t bale them out with our tax money and then let the EU stick it to us.

[RegulatorCountry]

Is there a part of the country where they are starting to sell the homes for what they can get???????

Detroit.

[Chode]

i guess it's what's left OUT of an article that catches my attention

[oneolcop]

Short answer: The problem is CREDIT.

As home-borrowers start to miss payments, the flow of money to the banks diminishes. This, in turn reduces the amount of money they are able to loan out. So far, who cares, it's some predatory bank that loses.

BUT; what happens next is where it starts to affect you and me. People who can't pay their mortgage also can't pay their credit card bills. This results in the banks having to cover their lost income by increasing the interest rates they charge borrowers (business as well as people). This eventually means that less credit is available. That means people will have to pay cash for goods and services since they can no longer borrow (or afford credit). When people stop paying with credit, things like food, fuel and other necessities stop flowing.

When a trucker loses money on hauling freight, he just figures it is time to go home and park his rig. No trucks, no deliveries, food and fuel shortages, chaos ensues.

Can't get fuel, can't go to work. Can't get to work, don't get paid, can't pay bills, banks can't pay their bills, economy slows and eventually stops (pretty much).

Just my opinion.

[Verloona Ti]

I am not sure whether Soros has ever stated an intent to destroy the economy of the USA and the west in general (ostensibly to "save the environment") but Maurice Strong (who's almost as evil and worthless) HAS :

In May, 1990, Strong was interviewed by WEST magazine of Alberta, Canada. Strong finishes the interview with a very bizarre and apocalyptic narrative about a novel he wishes to write. "Each year the World Economic Forum convenes in Davos, Switzerland. Over a thousand CEOs, prime ministers, finance ministers, and leading academics gather in February to attend meetings and set the economic agendas for the year ahead. What if a small group of these world leaders were to conclude that the principle risk to the earth comes from the actions of the rich countries? And if the world is to survive, those rich countries would have to sign an agreement reducing their impact on the environment. Will they do it? Will the rich countries agree to reduce their impact on the environment? Will they agree to save the earth? The group's conclusion is 'no.' The rich countries won't do it. They won't change. So, in order to save the planet, the group decides: isn't the only hope for the planet that the industrialized civilizations collapse? Isn't it our responsibility to bring that about? This group of world leaders form a secret society to bring about a world collapse. It's February. They're all at Davos. These aren't terrorists - they're world leaders. They have positioned themselves in the world's commodity and stock markets. They've engineered, using their access to stock exchanges, and computers, and gold supplies, a panic. Then they prevent the markets from closing. They jam the gears. They have mercenaries who hold the rest of the world leaders at Davos as hostage. The markets can't close...he rich countries...?" (The author of the article then goes on to say...) ...and Strong makes a slight motion with his fingers as if he were flicking a cigarette butt out of the window.

[SwankyC]

Let them exploit some other country

I dont think I'd use the word 'exploit' unless they were demanding the American gov bail them out, which wouldn't happen. Other than that, it's just a (failed) investment.

[Southack]

The Germans will catch it worse than the U.S. in the end, but the U.S. will see the more hyperventilating headlines into June, when the mid-May recovery becomes undeniable.