By Golem XIV on March 20, 2012
When the Chief Market Analyst of FX Solutions, Mr Joseph Trevisani, in an interview on CNBC on 23rd Sept 2011,was asked about fluctuating currency values, his reply created a stir. What he said was that you had to look at what was going on in Europe – everyone then expected him to mention Greece – but instead he said,
“There was a story out in a German newspaper this morning talking about a trillion euros, supposedly, unconfimed. of losses hidden in German Banks.”
He offered nothing further but the implication was that big players believed that the one stable and solvent European nation, the nation that was supposed to bail out the others was sitting on a time bomb of its own. Which would mean that Germany, the nation that liked to lecture others about lying, was lying. Lying about a potential trillion euro hole in its banks.
The story was around for a while but then faded because no one could add much to it, let alone confirm it. Could it really be that German banks were hiding, and lying about, a trillion in undeclared bad debts? What debts could they be if they weren’t just the exposure to bad debts in Greece and the other southern nations we already knew about? And where could they have been hidden? No answers no story.
First the easy part – what could the debts be? It has been an open secret that the Landesbanks bought up two lots of debt as fast as the ink on the contracts would dry. The first was securities made from sub-prime US mortgages. A trillion Euros of this sort of debt was created and sold in 2004-5 alone. One senior banker at one of the banks which sold this debt told me the Landesbanks would buy these securities from them before the deals were even complete. Much as property speculators further up the same stream would buy the property developements before they were even built. That debt, I have been told more than once, is still there. Sachsen LB collapsed but others are still hoping something miraculous will hatch from their egg of shit if they just sit on it long enough.
This is a pattern of hopeful deceit that is rampant globally. So it really shouldn’t be a surprise that German banks are doing it too.
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