Senior Linke Party Politicians Call for Strict Bank Separation

Sahra Wagenknecht, chairwoman of the Linke party’s group in the Bundestag, and MEP Fabio de Masi, the Linke party’s vice chairman of the European Parliament’s investigation committee on money laundering/tax evasion, published a joint statement in Spiegel Online which calls for strict action against Deutsche Bank. They note that the bank has been involved in so many legal violations that the question can justifiably be posed whether it is a criminal association, and indeed former Deutsche Bank employee and later whistleblower Eric Artzi spoke of a culture of crime. The bank however has never been prosecuted as a whole, and instead received billions in U.S. and European taxpayers’ money which helped it to survive the crisis of 2008. And if Germany’s Finance Minister Wolfgang Schäuble declares his confidence in this bank, taxpayers should keep an eye on their wallets, the two Linke politicians warn.

“The policy of central banks to flood the private banks with liquidity while at the same time drying out loans to the real economy has created even new financial bubbles in the past years,” Wagenknecht and De Masi write. An in-depth resolution and restructuring of private banks under state supervision, the approach with which Sweden for instance overcame its banking crisis in the 1990s has never occurred in the Eurozone. That is why the bad loans are still hanging like a Damocles’ sword over the financial system, they explain, adding that the EU bank resolution fund is much too small to handle cases like Deutsche Bank with its giant derivatives portfolio of EU42 billion euros—mega banks like this one are a ticking time bomb.

“But both the European Parliament nor the Bundestag have so far failed to decide for splitting up universal banks or a separation of investment banking from serious business with loans and deposits,” Wagenknecht and De Masi write. “That, however, is necessary in order to create a firewall between the casino banking and the lending business which is important for the national economy, and to prevent the central bank and also the taxpayers from having to step in when speculation deals fail. A bigger role of foreign investors at Deutsche Bank, be it from Qatar or from Wall Street, would only escalate the systemic risk. That would like turning on the air conditioning in a room full of influenza patients.

“We need more ‘boring banking’: more savings banks instead of gambling halls. Deutsche Bank must be split up, and its gambling units be shut down in a controlled way. If Herr Schäuble presents the German taxpayer with the bill from New York, it will be too late.”