New book explores the schemes and scandals of Deutsche Bank


JUDY WOODRUFF: The fallout from the 2008 global
financial crisis revealed that some of the world’s largest and most powerful banks were
deeply involved in an array of risky and reckless financial dealings that helped bring down
the economy. As Paul Solman tells us, Germany’s giant Deutsche
Bank took a particularly aggressive tack, the consequences of which are still playing
out today. His conversation is part of our regular series
on business and economics, Making Sense. PAUL SOLMAN: Deutsche Bank began by funding
German industry and risky railroads in the 19th century, helped bankroll the Nazis in
the 20th. From the end of World War II to the ’90s, it was a traditional lender. But as global finance went high-tech, high-risk,
Deutsche Bank joined the game, becoming a banker to Russian oligarchs, Iran, and the
principal lender to Donald Trump before he ran for office after he’d gone bankrupt. By 2008, it had become one of the three largest
banks in the world. David Enrich, finance editor at The New York
Times, has been covering the bank for years. The story is now in one place, “Dark Towers:
Deutsche Bank, Donald Trump and an Epic Trail of Destruction.” David Enrich, welcome. So, start us off with. The bank’s beginnings? DAVID ENRICH, Author, “Dark Towers: Deutsche
Bank, Donald Trump and an Epic Trail of Destruction”: The bank was founded in 1870. As you said, it was usually doing — lending
to big German companies and European companies that were trying to spread their wings internationally.
It was a very traditional, kind of conservative, not very interesting lender for most of its
first 12 decades. It’s running with the Nazis and help for the
Nazis was kind of the exception that proved the rule during that period. PAUL SOLMAN: You say — you write that it
helped fund Auschwitz. DAVID ENRICH: It helped fund the construction
of Auschwitz. It helped fund the construction of the factory that manufactured poison gas
that was used in Auschwitz. It helped with the Aryanization process, taking
over Jewish-owned businesses throughout Europe. PAUL SOLMAN: And it got rid of its own Jewish
bankers. DAVID ENRICH: Yes. I mean, that was the first
thing it did. So, it was very much a party to the genocide. PAUL SOLMAN: When did it become a high-risk
high roller? DAVID ENRICH: This started in the 1990s. So, Deutsche Bank’s leaders had watched as
one big American bank after another started developing a huge Wall Street franchise that
was competing internationally and starting to win business, not only from German companies,
but even in some cases from the German government. And Deutsche Bank, which is the national champion
in Germany, obviously, it looked at the situation and said, if the Wall Street firms are coming
to Germany, we should be going to Wall Street. And so they acquired a couple of investment
banks. They hired thousands and thousands of investment bankers from kind of the most
aggressive firms in Wall Street at the time, Merrill Lynch, Lehman Brothers, Bankers Trust. And they built, virtually from scratch and
virtually overnight, one of the biggest, most aggressive trading — sales and trading operations
that Wall Street had ever seen. And it just went head over head over heels, I think very
recklessly in hindsight, trying to compete. PAUL SOLMAN: Lots of people, lots of banks
went recklessly at that point. DAVID ENRICH: That’s true. PAUL SOLMAN: The two ahead of it — I looked
it up — and by 2008, the only two that were larger actually don’t exist anymore. DAVID ENRICH: Yes, that is absolutely true. This was — it was very much a creature of
the era in which it was operating. And this was a period in the ’80s and then in the ’90s
and into the — obviously into the 2000s, where all the rage, in Washington and London
and many capitals of the world, were very much operating under this assumption that
big private companies can look after themselves, and the government doesn’t need to interfere
in how they’re being run. PAUL SOLMAN: OK. So why the relationship with
Donald Trump, and when, exactly? DAVID ENRICH: So, the relationship started
in the late 1990s. Deutsche Bank at that time was trying to make
a name for itself on Wall Street, trying to build its brand in the United States. And
there are all these other, much more established banks out there. And Donald Trump at the time had defaulted
over and over again — or his businesses had — on loans from a wide array of banks. And
so he was basically off-limits to the mainstream financial industry. Donald Trump needed banks that had higher
tolerances for risk and less interest in their client’s reputation. And Deutsche Bank needed
clients who were essentially unbankable to normal financial institutions. So they were
kind of made for each other. PAUL SOLMAN: Both Trump and Deutsche Bank’s
loans to Trump made money, right? DAVID ENRICH: Well, it depends how you calculate
it. And over the past 20 years, Deutsche Bank
has lent on the order of about $2 billion to Trump. He’s defaulted on two of those,
at least. And one of those is — was a bond offer and that the Deutsche Bank did for its
clients, so that cost the Deutsche Bank’s clients money, not the bank itself. And the other was a huge loan to finance the
construction of a Chicago skyscraper in 2005… PAUL SOLMAN: Oh, yes, right. DAVID ENRICH: … which Trump defaulted on
in 2008. As it turned out, another arm of the bank
came and essentially bailed out its other arm by making another loan to Donald Trump.
And so that essentially wiped out the losses the bank would have faced. So, by my accounting, this has not actually
been a money-losing exercise for Deutsche Bank. PAUL SOLMAN: Right. DAVID ENRICH: And, in fact, Deutsche Bank
can afford to charge higher fees because Trump was completely unbankable by any other institution. So there was nowhere else really for him to
turn. And from Trump’s standpoint, this has been enormously helpful. I mean, he — no
other bank would touch him, and he wouldn’t have the business empire that he has today,
he probably wouldn’t be in the White House today, were it not for this relationship. PAUL SOLMAN: Would he really not be President
Donald Trump if not for the relationship with Deutsche Bank? DAVID ENRICH: I mean, that’s obviously an
impossible thing to measure, even though I keep saying it. (LAUGHTER) DAVID ENRICH: And I think the reality is that
Trump wouldn’t have been able to go on the building-and-buying spree that he went on
the past half-dozen years were it not for Deutsche Bank, whether it was converting the
old post office building here in Washington into a luxury hotel, which is something he
used repeatedly as a prop on the campaign trail. PAUL SOLMAN: Right. DAVID ENRICH: Building this huge skyscraper
in Chicago, purchasing the Doral golf resort in Florida. And so the list of things that Trump has built
or bought due to Deutsche Bank, it’s a very long list. He also — he would use Deutsche
Bank as a prop on the campaign trail, pointing — when people would — like Hillary Clinton,
would say, you have a horrible record as a businessman, no banks will touch you, he could
accurately say, wait just a second. One of the world’s biggest banks is very happy with
me as a customer. PAUL SOLMAN: And this was during the era of
innumerable — well, I guess there are numerable scandals, but there are a lot of them, all
associated with Deutsche Bank, right? DAVID ENRICH: Yes. They had more money-laundering schemes than
I can even count off the top of my head. They were evading taxes. They were bribing people.
They were violating international sanctions. Look at any major financial scandal in the
past 10 or 15 years, Deutsche Bank has been at or near the center. PAUL SOLMAN: Executives at Deutsche Bank knew
what was going on, right, with all these scandals? DAVID ENRICH: Yes, they knew about, and in
some times — in some cases, participated in these scandals, and, in other cases, really
tried to deal with the bad behavior. And one executive named Colin Fan, who was
one of the top executives of the bank, went so far as to give a video message to all of
its — all of the bank’s employees, telling them to watch how they communicate about the
wrongdoing they’re committed. And that became a bit of a viral sensation
on the Internet, because people noting that Colin Fan wasn’t saying, stop misbehaving.
He was saying, stop communicating in writing about your misbehavior. PAUL SOLMAN: But it was saved, wasn’t it,
by one of its — or several of its employees in 2008? It didn’t go under in 2008. DAVID ENRICH: That’s right. A number of traders made a huge bet that the
U.S. housing market was going to collapse. And they engineered these gigantic transactions,
where they stood to profit on the collapse of that market. And those bets largely, I
think, did save Deutsche Bank at the time. PAUL SOLMAN: The book is “Dark Towers.” David Enrich, the author, thank you very much. DAVID ENRICH: Thank you. JUDY WOODRUFF: An example, a reminder of why
news reporting matters so very much.

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