Freitag, 7. Oktober 2016

Deutsche Bank Shareholders: Life Under Capitalism Can Be Tough!

Reports about the impending failure of Deutsche Bank are greatly exaggerated! Deutsche - like any other company - can only fail in one of two ways: illiquidity or insolvency. De facto, Deutsche cannot become illiquid because of the (de facto unlimited) refinancing availability from the ECB. On the other hand, Deutsche could become involvent (insufficient capital) and that scenario actually looks quite probable at this point.

If Deutsche were to need capital, there should be no lack of supply. Certainly some of the existing shareholders (Qatar?) ought to be interested in increasing their ownership share at a cheap price. The greatest source of fresh capital, however, would be the German state.

The role model should be the US government's rescue of AIG in 2008. The state acquired 80% of AIG at a relatively low price. In the end, that allowed the state to take a very large profit when it exited AIG a few years later. AIG's founder and previous major shareholder Maurice Greenberg may justifiably feel that the has been ripped off by the state to the tune of 30 BUSD.

But, then: a capitalist like Maurice Greenberg will understand that life under capitalism can be very tough.