Storm around Deutsche Bank grows as charges against some of its executives for fraud are announced in Italy:worlds oldest bank Monte dei Paschi di Sienna involved some excutives also charged

The storm and turbulence around the future of the Deutsche Bank has grown with the announcement last week that some of its executives would face fraud charges in Italy in connection with the charges levied against some executives of the world’s oldest bank the Monte dei Paschi di Sienna founded in 1472. This announcement will only increase the pressure on shareholders to liquidate their shares and assets connected to the bank. Public opinion in Germany opposed to helping Deutsche bank survive the crisis will only harden once the news is digested. The trial in Italy will get under way in December.

In the meantime there is plenty of time for things to unravel. The ECB is in a no win position in wanting to manage the crisis and scandal and prevent it from becoming systemic. Deutsche bank has been trying so far, unsuccessfully apparently, to negotiate a reduction in the 14 billion US $ fine that the US department of Justice is demanding to settle a claim growing out of mortgage backed securities which Deutsche bank created and sold in the run up to the financial crash of 208. If they don’t get a major reduction, analysts believe the bank would fall into bankruptcy as shareholders desert the bank and a bank run ensues.The scandal and charges show that once again the financial markets are very slow learners about the dangers of derivatives and unethical practices and gambling as a strategy motivated by reckless greed. Again its an illustration of Minsky’s and Keynes’s understanding that speculation, risk and uncertainty is central to modern finance capitalism. Some analysts speculate that the collapse of Deutsche Bank and its links to the Italian banking crisis would have cascading consequences for global financial markets.We shall see how widespread the fallout will be in the coming weeks.

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About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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