Thursday, 8 September 2011

DEUTSCHE BANK: a case of managed free enterprise corruption

Deutsche Bank is one of the oldest in  the Western World and one of the most powerful financial institutions in the world. This particular institution behaves something like a government agency, partly because it has an inexorable political and financial link to government which works to promote German corporate interests, and more specifically those of the large banks like Deutsche Bank. There have been allegations that this bank has been involved in everything from money laundering operations, to manipulating statistics about government debt so that bond rates could be kept low before the 2008-2011 recession, to major involvement inn sub-prime mortgages and hedge funds.

The US Justice Department has sued this bank for more than a billion dollars, some of its executives have been linked to bribery scandals around the world, including the Vatican, the German Chancellor has been a notorious supporter and has gone out of her way to intervene on the bank's behalf, and policy is carved so as to advance its interests. But this is not the worst of it as far as this institution's role in society is concerned. Deutsche Bank has a history of conducting business with corrupt regimes around the world, regimes like Turkmenistan that possesses large natural gas reserves and is the supplier to Russia's pipeline GAZPROM. According to UN sources, Deutsche Bank arranged for Turkmenistan president-for-life Saparmurat Niyiazov to use public assets as a means to fatten his Deutsche Bank account.

In 2009, the bank was spying on its own employees as well as external entities, as government investigations con firmed. More recently, the same bank along with a number of US and UK banks have been named in law suits regarding Italian bonds; an issue that has forced bond rates up and has placed Italy in a comparable position as Greece and the rest of southern Europe. The amazing thing in all of this, is that Deutsche Bank has the audacity to offer advice on financial policy to governments, and the latter actually take it to heart because they know that behind the bank is the German government.

The fact that the voice of this bank matters more than does the voice of the German Finance Ministry is scary, or at least it should scare Germans and Europeans alike. Should the integrity of the European Union and the euro as a reserve currency be based on the narrow interests of a few banks like Deutsche Bank, and if so, should the German and EU citizens not have the right to full disclosure about the extensive operations of this bank along with a handful of others that determines the future of a continent? Is capitalism to be saved or sacrificed so that Deutsche Bank and a few other financial institutions are saved because they have become one and the same as contemporary capitalism?

This is not an issue about one bank that has developed a very special relationship with the state. This a much larger issue about the integrity of the so called market economy that is supposed to be operating freely, by the invisible hand. The hand is very visible and it is that of government guiding the financial institutions toward profitability at any cost under any means no matter how corrupt. Can capitalism be rationalized and confidence in the system restored? 

As conditions become worse owing to capital concentration, my 'qualitative analytical approach' vs. the quantitative models that most economists use indicate that the crisis point has to hit 'depression-like conditions' before we see any changes. Who would have thought in 2008 when the recession hit that the state would actually further accommodate capital along the same line that cauysed the recession in the first place? I was so optimistic then that reform was imminent, that the relationship between financial and political elites would change. I was very wrong.

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