| Online: | |
| Visits: | |
| Stories: |
| Story Views | |
| Now: | |
| Last Hour: | |
| Last 24 Hours: | |
| Total: | |
The Question Is Not Is Deutsche Bank the Next Lehman, It’s “Is Lehman the Face of Banking in the Future
So,Tyler just ran an interesting piece titled “Is Deutsche Bank The Next Lehman?” There is one correction that needs to be made where Tyler says “Probably the first public indication that things were heading downhill for Lehman wasn’t until June 9th, 2008, when Fitch Ratings cut Lehman’s rating to AA-minus, outlook negative“. Well, I gave ample warning about Lehman (and Bear Stearns) way before that – to wit:
The warning of Lehman Brothers before anyone had a clue!!! (February through May 2008): Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008 (It would appear that Lehman’s hedges are paying off for them. The have the most CMBS and RMBS as a percent of tangible equity on the street following BSC. The question is, “Can they monetize those hedges?”. I’m curious to see how the options on Lehman will be priced tomorrow. I really don’t have enough. Goes to show you how stingy I am. I bought them before Lehman was on anybody’s radar and I was still to cheap to gorge. Now, all of the alarms have sounded and I’ll have to pay up to participate or go in short. There is too much attention focused on Lehman right now.) | I just got this email on Lehman from my clearing desk Monday, March 17th, 2008 by Reggie Middleton | Lehman stock, rumors and anti-rumors that support the rumors Friday, March 28th, 2008 | It appears that I should have dug deeper into Lehman! May 2008
The concerns regarding Deustche are quite possiblywell founded, and like Lehman, I doubt very seriously if DB is in the shit can by itself. Reference my article “EU Area Residents’ Step-by-Step Guide to Escaping the Upcoming Bank Bail-ins & Capital Controls“:
The Impossible Trinity or “The Trilemma”, in which three policy positions are possible. If a nation were to adopt positiona, for example, then it would maintain a fixed exchange rate and allow free capital flows, the consequence of which would be loss of monetary sovereignty.
Put plainly, either balance sheets get burned trying to buy and sell currencies, capital controls are implemented, or QE (sovereign monetary policy) fails. Trying all three simultaneously has NEVER, EVER worked! Of course, according to the ECB, it’s different this time…
Guess what? Balance sheets are burned.
Realize why the ECB is doing this QE thing to the level that it is. Their banks are still in trouble, material trouble. Reference “Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe” from 5 years ago and tell me if you think its gotten better (Hint: pay very close attention to the countries these banks are domiciled in, capital controls data soon to follow several paragraphs below)…
Sovereign Risk Alpha: The Banks Are Bigger Than Many of the Sovereigns
Well, it’s all relative. The banks are smaller, leverage is down – and that’s after 6 years of global QE, ZIRP and now NIRP, yet each and every bank is STILL big enough to collapse the country that it’s domicled in…
With this in mind, let’s review the The Anatomy of a European Bank Run!
Below is a chart excerpted from our work showing the asset/liability funding mismatch of a French bank. The actual name of the bank is not at issue here. What is at issue is what situation this bank has found itself in and why it is in said situation. Both Lehman and Bear Stearns collapsed from the EXACT SAME PROBLEM! That problem is asset/Liabitlity mismatch.
What many bank depositors who believe their bank deposits are actually cash don’t realize is that they are creditors to the bank – short term lenders. You bank accounts, time deposit accounts, CDs, checking and savings accounts are short term, UNSECURED loans to bank that uses said loans to engaged in significantly and materially more risky endeavors to generate profits. What sort of endeavors, you may ask? Well, as was the case with many French, Cypriot, Italian, Spanish and German banks, making real estate, corporate and government loans of a longer term to profligate nations such as Greece, for one. It’s good work of you an get it. Borrow from mom and pop savers at 25 basis points and lend to Greece at 23%. Good money, dude!
That is, until it becomes apparent that the money you lent Greece isn’t going to come back.
Even that, in and of itself is not a problem since the fractional reserve banking system doesn’t really require you to have the money that you borrowed from mom and pop on hand to pay them all back. It works, until it doesn’t. When mom and pop figure out what you’ve done with their money by reading and article such as this, that’s when the stinky brown stuff hits the fan blades. You get a run on the bank as everyone tries to get those overnight, and 1 and 2 month deposits out – at the same time.
This is what happened to Bear Stearns and Lehman, literally overnight – although the signs were available months beforehand if you paid attention. I predicted both of these collapses at least 60 days before they occurred:
-
The collapse of Bear Stearns in January 2008 (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear?
Source: http://silveristhenew.com/2015/06/12/the-question-is-not-is-deutsche-bank-the-next-lehman-its-is-lehman-the-face-of-banking-in-the-future/
