But Deutsche has a long history of dubious business practices. It violated sanctions law by doing business with Iran and Syria. It funded the German war machine and Nazi death camps at Auschwitz during World War II.
Around lunchtime on Wednesday, December 7, 2011, employees in the basement mailroom of Deutsche’s Twin Towers in Frankfurt noticed a bulky brown envelope addressed to Joe Ackermann. When they ran it through an X-ray machine, they spotted what looked like shrapnel. Police and a bomb squad rushed over, their sirens screaming. Inside the envelope was a small explosive device, sent by an Italian anarchist group. An accompanying letter attacked “banks, bankers, fleas, and bloodsuckers.”
Like Abs and Herrhausen before him, Ackermann had assumed the mantle of statesman. He traveled the world on a private NetJets plane, dining with world leaders including Vladimir Putin and George W. Bush—not to mention a who’s who of European politicians and royals. With Europe now in its own financial crisis, and entire countries like Greece and Ireland falling apart, Ackermann had become a sort of shadow finance minister for the entire continent. Germany was Europe’s most powerful country, dictating bailout terms for failing nations, and it was Ackermann to whom Germany’s chancellor, Angela Merkel, regularly turned for financial advice. But unlike the role that Herrhausen had played, such as urging the forgiveness of the debts of third-world countries, the advice Ackermann provided tended to benefit banks—and one bank in particular. Restructuring Greece’s crushing debt in a way that would help that country recover but that would saddle its creditors with losses was dangerous, he warned. And indeed it was dangerous—for Deutsche, which owned boatloads of Greek government bonds. (Because of their riskiness, the bonds came with high interest rates, which had attracted profit-hungry institutions.) Ackermann got his way, and the Greek government, unable to dramatically reduce its public debts, needed to find other, draconian ways to come up with money, such as slashing budgets and selling prized public assets. The results were savage: Islands, marinas, and airports were put up for sale. Unemployment, homelessness, crime, and suicide rates soared.
Ackermann’s successful fearmongering didn’t endear him to the public. In many parts of the world, he had become a villainous figure. A Berlin songwriter composed a satirical ditty that cheerfully called for his assassination. Several months before the letter bomb was sent, the International Monetary Fund’s former chief economist branded Ackermann as “one of the most dangerous bankers in the world.”
In the United States, the Occupy Wall Street movement had taken hold in Lower Manhattan, with protesters brandishing placards, sleeping in tents—and transforming the public, treelined, and well-heated atrium of Deutsche’s headquarters at 60 Wall Street into a locus for activists. American regulators, too, had Deutsche in their sights. During the head-in-the-sand regulatory era of the Clinton and the second Bush administrations, Deutsche had housed its vast Wall Street business in a few shell companies that weren’t subject to American oversight. At the time, the government’s assumption had always been that American regulators didn’t need to worry about a giant foreign bank’s U.S. operations because the parent company would rescue them if they encountered trouble. But the financial crisis had shown that was wishful thinking; there were plenty of examples of frail banks leaving their foreign subsidiaries to die lonely deaths. And Deutsche’s wobbly finances—in particular its bottomless pit of derivatives and its exposure to the European economic crisis—seemed to put the American outpost at risk of being abandoned in a pinch. So regulators in the United States introduced rules that required banks like Deutsche to buttress their American operations.
Deutsche’s first response was to tinker with the legal structure of its main U.S. business entity to exploit a gap in the law (which initially didn’t apply to certain types of holding companies) and evade the new rules. But when that plan came to light, angry lawmakers and regulators slammed the loophole shut. Deutsche shrieked in protest: Requiring more money to be kept in the United States meant less money being available elsewhere in the world, and that could hurt the global economy, Ackermann threatened. The claim was implausible, but he was well positioned to lean on regulators. He chaired a powerful lobbying organization called the Institute of International Finance. When policymakers—including senior U.S. officials like Treasury secretary Tim Geithner and Federal Reserve chairman Ben Bernanke—convened gatherings to hash out new rules, the IIF’s representatives, often Ackermann himself, generally were in the room. (The IIF also was one of the most outspoken advocates against restructuring the debt of Greece and other stricken countries in southern Europe.)
At a time when regulators seemed to be gaining the upper hand, the reality was more complex. Different countries jealously guarded their authority over their domestic banks. Deutsche more than almost any other multinational financial institution deftly managed to exploit rivalries among regulators to shield itself from tougher rules or greater outside scrutiny. German regulators—in particular an agency called BaFin, which prided itself on protecting its local companies—rushed to circle the wagons. They pushed to water down proposed international rules that would cap how much risk banks like Deutsche were allowed to take. When foreign governments tried to investigate the bank, BaFin ran interference, insisting that any demands for information be diverted into a labyrinth of German bureaucracy.
Frustrated American and British regulators took to deriding their German counterparts as “the representatives of Deutsche Bank” because they were so clearly doing its bidding. For now, Deutsche executives sat back and enjoyed the regulatory turf war. Their amusement wouldn’t last.
From the book “Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction” by David Enrich. Copyright © 2020 by David Enrich. From Custom House, a line of books from William Morrow/HarperCollins Publishers. Reprinted by permission.