Tuesday, February 3, 2009

Germany's bad bank model - Taking shape?

You will by now heard about the BAD BANK or the AGGREGATOR BANK of US that would take the bad illiquid toxic assets on to its own balance sheets to bring in much needed confidence in the financial system in the country.
Now Business week carries an article where they mention the silent developments taking place in the strongest of European economies - Germany.

DB which lost $5.2bn in 2008, is supposedly leading the developments shaping the BAD BANK model for the nation. Last Monday Hugo Bänziger, the chief risk officer at Deutsche Bank, appeared before members of the conservative Christian Democratic Union's (CDU's) finance committee to promote the potential benefits of a "bad bank."

But this bad bank may not be a single outpost of all the financial toxic assets/ liabilities like that in US but might be a series a privately held banks in Germany. Another critical difference is the risks taking would be that of the shareholders in these institutions and not that of the government. But where ever the need of liquidity will be felt - government would suply that into the system.
Thus increasingly, we are seeing an era come into being where we have the governments having greater control over our lives and through the corporations that run the economy and thus us.

In the meantime, German government is discreetly planning to nationalize Hypo real estate, a measure which would be raised a lot of outcry few months back.
And mind you folks this is something that would occur in future as a common occurence....


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