It would be hilarious if DB called all Trump's loans in and he had to file bankruptcy again.

No telling what he would give away to China, Russia, Saudi Arabia.

I know that’s a hypothetical for political theater but that’s generally not how things work in loan covenants, LOCs included. Calling in individual loans would likely do more harm than good for an institution in DB’s position.

I know but I would be remiss in my Libatard duty not to take such an easy layup.

Can we try to keep this thread somewhat on topic? E.g. a systemically important financial institution that's more than 2x the size of Lehman possibly teetering on the edge of collapse (and it's ultimate fate is out of the control of the U.S.)

Edit: not that I should feed the subject, but it appears that DB lent Trump ~$2billion over the course of almost three decades with the maximum amount outstanding being ~$340,000,000 (best estimates I could find). That means, at its absolute maximum, DB's loans to Trump amounted to 0.02% of DB's assets. Given the typical maturity of bank assets and DB's AUM under the time period in question, $2billion in loans likely amounted to less than 0.0001% of DB's loan origination during that period. So, are we done with Trump in this thread?

Ok, but is DB not subject to oversight, stress tests? If there is oversight, who seems to be failing? Impact on the EU?

DB's U.S. operations are subject to oversight by the Federal Reserve and the rest of the alphabet soup of regulators where they apply. In the scope of things, DB's U.S. operations are quite small. DB's primary regulators are the ECB, the Bundesbank, and one other agency in Europe who's name I cannot recall at the moment. DB's fate is largely out of the hands of the U.S.

Edit: the reason we should all be concerned is counterparty risk.
Edit 2: the oversight responsibility primarily falls to the EU's regulators.

Haha! On topic? Are you kidding? This place is so full of TDS afflicted people whose hatred is so deep they can think of nothing else but Trump all day long. They read a thoughtful post like yours and immediately think, '..there MUST be a Trump angle here...or...I'll just make one up because he is a BIGOTED, RACIST, XENOPHOBIC, MISOGYNISTIC ASSHOLE that deserves to DIE!!!' You are addressing a bunch of sheeple that drink in every word uttered by every talking head on MSNBC, CNN, and every other liberal network with no ability to separate the lies from the facts.

That said, I appreciate your financially oriented commentary even though you and I are on opposite sides of the political spectrum. Didn't know anything about the DB problems. Very interesting.

Greg

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If you are a Canuck that engages in gratuitous bashing of the US, you are probably on my Iggy List. So, save your self a bunch of typing a response unless you also feel the need to gratuitously bash me. If so, have fun.
"Don't underestimate Joe's ability to f___ things up" - Barack Obama, 2020

So who are the counterparties with most exposure to a DB collapse?

ETA: And how can I short them? ;)

Congratulations, it took exactly one reply to turn this into an anti-Trump thread.

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I miss YaHey

didn't you and i just discuss regulations? of the finance industry? to keep the wave amplitudes in boom/bust cycles down? holds $50T in derivatives? banks pretending to be insurance companies, just without the requisite reserves to be insurance companies.

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Dan Empfield
aka Slowman

Again it is NOT 50T in derivatives. That's their uncompressed book meaning they have both a buy and sell with separate parties who in the event of a default step in and make the other party the other side as if they did a bilateral trade.

I don't have access to the necessary data to tell you who DB's most exposed counterparties are. Here's what I can tell you:

• A pier of mine worked for Citi from 2012 to 2016. Citi started winding down a lot of its derivatives positions starting in ~2015 and there was a priority placed on unwinding positions with DB.
• JPM has been "provisioning" against counterparty risk with DB since ~2012 but that's about as much color as I have on them.
• If an institution like DB were to "blow up" the shockwaves would ripple around the world. Credit markets would seize and enter an ice age. Very few would remain untouched. Europe would be assured to enter a deep depression.

Shorting something like this is a fool's errand. Shorting is a fool's errand in general: limited upside, unlimited downside. The only people who should even contemplate shorting something like this should be people with intimate knowledge of how the financial system works, practical knowledge of how DB and other banks function with each other, a good read on how the EU would respond in the crisis, deep reserves of cash, and significant mental fortitude. In other words, there might be a dozen people on earth for whom it would be advisable to try to front run a collapse of DB and the resulting fallout.

That last bit reminds me

Any good books on soros, the UK and the erm

Thank you for the serious answer to a mostly tongue-in-cheek second question around the short. I read "The Big Short" and did some moderate Googling of concepts and such in connection with that read, which is about the extent of my knowledge on the subject - I'm well aware I've got no business trying anything of the sort (notwithstanding an idle curiosity to see if I could crystal ball something from the sidelines). Although, the "three guys with a $100k in a Schwabb account" (Colony Capital, I think they were called) that were one of the investor groups described in "The Big Short" seemed to do ok the last time around...

You need to read the greatest trade ever

Then for balance to see how quickly things can go wrong: when genius failed

So much smoke and mirrors I don't think there is anything the vast majority of people can do. I have no idea. I know I pulled most of my equities out of the market in 2007 because I could see all the crap mortgages that were out there. This sort of thing I don't have any idea.

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They constantly try to escape from the darkness outside and within
Dreaming of systems so perfect that no one will need to be good T.S. Eliot

Seriously? Come on man you can't be serious. Shirley you mistyped.

Again, most of DB's activities exist outside of the purview of U.S. regulators. This is a primarily European entity in function. A good chunk of these derivatives are interest rate swaps and I'd suspect a good majority of those are with Asian counterparties.

With regards to derivatives, you need them if you want to have things like a 30 year fixed mortgage. For what it's worth, U.S. banks are now significantly better capitalized and regulated than U.S. insurance companies.

Europe's approach to banking regulation has been very different than the U.S. and this comes down to the Anglo vs Continental debate in finance. Anglo finance is very market driven in nature: the banks don't really care if they're financing housing, commercial, consumption, infrastructure, corporate investment, etc. They largely let the market tell them where to lend money and underwriting standards (when the banks behave) are largely driven by the ability of the borrower to repay and are fairly uniform. Again, market driven.

Continental finance is driven more by the investment priorities of the government which generally means subsidizing the loans of "national champions" and various political interests at the expense of other sectors of the economy. That's why a system like Bausparvertrag exists (which was the only way to get a mortgage in Germany until very recently) and why you now have a ton of zombie companies in Europe... who's bonds also now have negative yields. Continental finance was always destined to create large imbalances.

Below is a chart showing outstanding bonds with negative yields. Almost all (as in 99.999%) of these bonds exist outside of the U.S. financial system (origination, creditor, debtor). In other words, this isn't a U.S. problem in any capacity though many of the loans are USD denominated and the effects will reverberate and find their way to the U.S. in time. As to who these loans are made to, most of them are sovereign credits though >$3trillion of them are corporates and a good chunk of those are companies that haven't been able to cover interest payments with revenue for a number of years.

Great book.


On Soros I've got nothing (other than a juicy random tidbit that one of his former partners is tied up with Epstein).

On the ERM there's a ton of good books... gosh, plenty of academic papers from the late 80s written about how the EMU was doomed from the start. Interestingly, if you read through papers for/against the EMU at the time you can see the pretty clear ideological divide at the time. IIRC Friedman wrote a book on the ERM and you can probably find ERM criticisms from Mirless and Bauer. There were probably plenty of BoE working papers critiquing the ERM as the BoE maintained a hardline anti-currency union position throughout (and they were obviously vindicated). The Euro by Stiglitz is a decent post-mortem that also covers the history of the ERM and the birth of the Euro.

Not sure what you're looking for with regards to the ERM. The details on that one don't really matter as the obvious glaring flaw is monetary union without fiscal (and therefore political) union.