Tuesday, August 21, 2007
"I Know Nothing...."
Anyone who read David Marsh's "The Bundesbank" intimately knows just how tight and conservative Germans, and the culture of German banking really are. Maybe its because they experienced first-hand and all too vividly the post-Versailles Weimar Inflation, or more likely the impoverished and inflationary days following the end of the second world war.
This is not to say that Germany sailed through the last four decades without financial indiscretion, slip or scandal. Some may be old enough to remember the spectacular failure of private Cologne-based Herstatt Bank, for which settlement risk is now indelibly associated. And there was was Jurgen Schneider, seems to have bit off a development or an office building-or-five-too-many. And let us not forget the almost equally spectacular blow-up of Metallgesellschaft who was perhaps single-handledly responsible for $10 oil that nearly sunk Texas and sent revolution throughout the middle-east. One might also include the giant LBO (fully valuing @ 1:1 ost/west DM conv the DDR, in the folly-list where caution was throw to the wind. But this was, to be fair, wholly political even. The hangover, still is being felt today.
But despite these occasional past lapses, it is still surprising that in the land that birthed BuBa chiefs, Helmut Schlessinger, Karl-Otto Pohl, and articulate anti-housing bubble provocateur Ottmar Issing, that we discover IKB and Sachsen Landesbank with ummm rather large (in my book) dollar sub-prime zaitech portfolios that one must assume are worth rather less than their historical cost-base, yielding what will undoubtedly be sizable if not catastrophic losses. As a result, it is incumbent upon Germans and non-Germans to ask: "WTF guys???" "What were you thinking??!?" "Have you a secret desire to work deep in the mines of the Ruhr?" Didn't you see what happened to Bob Citron? Or the jail facing BAWAG's Elsner & Zettler??
My knowledge is indeed limited here, and so I can barely comment but please, someone tell me whether we are witnessing a "Schneider-ish" fraud or a "Schultzianly oafish" investment strategy.