By Nicholas Asheshov ✐
Deutsche Bank, DB, Germany’s flagship financial institution, has announced that for the past quarter it has lost $7 billion and for the first time in half a century it will not pay the dividend on which tens of thousands of German families rely. A big part of the loss is to pay fines by European and United States courts and regulators for dishonesty in London, New York and in Germany itself. The dishonesty consisted in part in selling clients valueless bonds and paper, and in rigging interest and currency exchange rates.
The latest losses follow years of criminal activities, as described by New York, London and Berlin prosecutors, by DB among a dozen French, English, Swiss and U.S. global banks caught rigging markets. The money, the funny money, goes to directors and managers, not to shareholders much less to the tax collector. The DB announcement came a few days after Volkswagen admitted to fixing the exhaust emissions of its diesel vehicles. VW faces $20bn worth of criminal charges and trading losses. The head of VW, a 68-year-old engineer, said it was nothing to do with him. He has been replaced, taking $70mn in retirement benefits.
Lufthansa allowed earlier this year one of its planes to be deliberately crashed, killing 200 passengers.
VW, Deutsche Bank and Lufthansa have represented German, European, world dependability and engineering and social responsibility. Ambitious capitalism toned down by worker and government involvement, a contrast to Anglo-American a ultranza combative corporations, ruthless but often as we see today, more open. Japan, so successful for a few decades after the War, is tight and closed and its famously turgid economy seems to reflect this.
It seems to be a similar story, perhaps, in the EU. VW, DB and Lufthansa have represented, created, today’s version of the European tradition.
Next door, in Switzerland, the Swiss president of FIFA, Herr Blatter, is being investigated by U.S. and Swiss law enforcement agencies as the head of a criminal organization, with its HQ in Zurich, running the world’s biggest, bar none, recreation business.
Long-respected Swiss banks like UBS, Union des Banques Suisses, and Credit Suisse are in court, like Deutsche Bank, for rigging the markets and running money-laundering and tax rackets. They also face charges of rigging precious metals and money markets.
Credit Suisse is raising $6bn in new capital to make up losses, as also is DB itself. Today’s shareholders are being watered down. They are losing part of their investment as well as their dividends. It is difficult to put together half a dozen names that have better represented the most reliable, responsible face of 21st Century capitalism.
Everyone also knows that the European banks, led by DB and the International Monetary Fund, have lent Greece $460bn and that every last euro of this has disappeared into new accounts at the same banks. European taxpayers will pay the losses via the Brussels printing presses. To put this in context, the total loans to Latin America in the 1980s banking crisis was under $200bn loaned to 15 countries with a population of 600mn. They paid it back, give or take.
The population of Greece is 10mn. Every Greek man, woman and child should be sitting on $40,000. But many of them are hungry or worse, out of work, facing a daily invasion of thousands of war refugees from the Middle East.
It was just 25 and a bit years ago that Communism and the Berlin Wall collapsed. The capitalist West had won a 70-year confrontation. Good had vanquished Bad. Christian values had emerged as the dominant, indeed the only, world scheme. If it was not Christian, it was a first cousin, Liberal Democracy, the rule of law.
When the Berlin Wall fell in 1989, Peru was a failing nation, as is today, for instance, Venezuela. The government was collapsing, terrucos and cocaine cartels seemed to be taking over. Peruvians had to carry their money in shopping bags, wheelbarrows even.
A quarter of a century later, Peru is a liberal democracy with a solid financial system. It meets its international obligations. It has a lively line in corruption. But its best efforts are a modest, tropical shadow of the German and Swiss corporations which have set out to cheat their customers and stakeholders.
The failed nation of 1989 has had elections every five years, since 1980 with a whoops to bring in the new millenium. In six months there will be another election. And another again, it’s reasonable to expect, in 2021.
This is not to say that Peru does not have a long way to go. Nor that the Germans and the Swiss are not thoroughly good people, world leaders in all sorts of valuable ways.
Many Peruvians would understandably harumph! at the “rule of law” clause that necessarily goes with liberal democracy. But just this week the Constitutional Tribunal with an occasionally fuzzy record, cracked down decisively on an attempt by Nadine Heredia, President Humala’s wife, to slide past due process with openly inappropriate legal maneuvers. Instead of skirting the issue the Tribunal quickly, decisively, cleanly blew the whistle on the lively Sra. Humala and stopped her efforts to avoid investigation by the courts into her colorful financial history. It may be that the Tribunal will have done her a favor and that her financial doings may be less than meets the eye. But the point is that Peru has shown that when push comes to shove, as it certainly did in this case, the system has proven to be not only better than expected by most, but getting better than it used to be.
Nick Asheshov was editor of the Andean Air Mail & Peruvian Times during the 1970s and 1980s, and of The South Pacific Mail, Santiago during the 1990s. He was Latin America Editor of Institutional Investor, New York over the same period. He lives in Urubamba, where he writes a blog and where he has been prominent in the hotel and railway business.