In These New Times

Whatever the underlying reality concerning German banks, the contrast with Britain couldn’t be starker. Whereas the British banks have all been openly or covertly at the trough, the German bankers seemingly feel no urgent need for assistance and may have to be force fed. Considering that the total exposure of their state health and pension schemes to Lehman’s is a paltry 120 million, couldn’t it be the case that Germany’s exposure to US toxic garbage is, in fact, less than we have been led to believe, and that this bailout scheme has been foisted on them in an attempt to bankrupt the German state British-style.

Deccan Herald

26th October, 2008

A second German bank lined up on Saturday for a government rescue, as officials reportedly debated whether to force recapitalisation on shy commercial banks.

One of the banks run by Germany’s 16 states, BayernLB, has already appealed for help, and a second landesbank, HSH Nordbank, run by the states of Hamburg and Schleswig-Holstein, said it had decided in principle to apply.

Landesbanks, which also have powerful non-government shareholders, have been among institutions hit hardest in the past year by investment in subprime US mortgages.

Rescue measures

“The board of HSH Nordbank has decided in principle to make use of the government measures,” a spokesman, Rune Hoffmann, told DPA.

“But we are not under pressure of time.” He said the company’s prime objective was a resumption of interbank lending. He said HSH’s diverse shareholders had not yet finally approved the move.

A third landesbank, WestLB, was on the verge of applying for help, the news weekly Der Spiegel said on Saturday. It quoted the chief executive, Heinz Hilgert, saying that WestLB would also seek a government takeover of its toxic securities.

The magazine said government officials were meanwhile debating how to force recapitalisation on Germany’s commercial banks, which have resisted taking up the government offer. Commercial banks reportedly fear a loss of credibility if they seek state aid. Their senior executives would also face a pay cap as a condition for aid.

Quoting sources, Der Spiegel said German Finance Minister Peer Steinbrueck planned to summon commercial bank chiefs to Berlin in two weeks to press them to jointly apply for help.

A fresh embarrassment awaited the state of Bavaria over its landesbank, BayernLB, which needs 6.4 billion euros (about $8 billion) in new funds, Spiegel added.

It said Bavaria and its trustee savings banks had hoped for relief from a promise earlier in the year to guarantee 4.8 billion euros of the sum, and did not realise the week-old federal aid package ruled this out. The Bavarian government quarrelled this week with the savings banks, which as joint owners of BayernLB successfully resisted a government bid to sack BayernLB chief executive Michael Kemmer.

Meanwhile, German public retirement insurance and health insurance funds invested a little more than US$128 million with failed US investment bank Lehman Brothers, the government said.