Obama’s Political Bank Run
The U.S. stages an election robbery and nearly triggers a panic.
The government threat to Deutsche Bank’s safety and soundness began on Sept. 15. That’s when the Journal reported that Justice was demanding an eye-watering $14 billion to resolve an investigation of the bank’s sale of mortgage-backed securities prior to the 2008 financial panic.
Deutsche Bank then had to acknowledge the size of this government stick-up as its stock price proceeded to drop more than 20% in a fortnight. The lack of exuberance among investors was entirely rational. Washington’s proposed withdrawal represented most of the bank’s market capitalization.
Why announce this giant robbery now? Well, on Friday morning the Financial Times* quoted two anonymous sources as saying Justice is seeking an “omnibus settlement” from Deutsche Bank, Barclays and Credit Suisse “to achieve maximum public impact by collecting an eye-catching sum in penalties” merely “weeks before the U.S. presidential election.”
The FT is often wrong, but we assume it didn’t make this up. And you don’t have to be a cynic to believe that this Administration would stage a bank raid that it could brag about to rev up voter enthusiasm among Bernie Sanders and Elizabeth Warren Democrats.
The problem is that the feds were creating the very systemic financial risk—aka “contagion”—that they claim to want to prevent. The public raid created so many doubts that major hedge funds began to flee Deutsche Bank amid uncertainty about its financial stability. The bank’s travails also called into question the strength of other European lenders, whose stock prices also fell.
www.wsj.com/articles...1475275928

US seeks pre-election settlement of bank mis-selling claims
DoJ aims for maximum impact with omnibus fine for Deutsche, Barclays and Credit Suisse
www.ft.com/content/d...bbef66f80e