By SPIEGEL Staff
Instead, the damaged Landesbanken continue to plod along, frittering away taxpayers' money. HSH Nordbank is a case in point. For weeks now the bank, under new CEO Dirk Jens Nonnenmacher, has had its back to the wall, and it is believed to be facing a loss of up to €2 billion ($2.8 billion) for the year. At the end of November, after lengthy negotiations with Soffin, HSH Nordbank secured a liquidity guarantee for €30 billion ($42 billion).
Despite the government bailout, however, the Hamburg-based institution still has not managed to raise €3 billion ($4.2 billion) in the capital markets with a three-year corporate bond. Officially, the bank claims that the potential investors' books were already closed. In reality, says a Frankfurt banker, it was "the market's fatal vote of no confidence." In the same week, the major French bank BNP Paribas and the Italian bank Intesa Sanpaolo had no problems placing their new bonds -- without government guarantees.
The strike by investors shows that hardly anyone believes that the owners of HSH Nordbank want to or are capable of raising additional equity. Its government owners, Schleswig-Holstein and Hamburg, two financially strapped German states, are in dire straits. Among the other owners, the local savings banks want out completely, and US private investor J.C. Flowers is also proving to be uncooperative.
Deutsche CEO Accused of Stigmatizing Bailout
Insiders expect HSH to be knocking on Soffin's door in January. It is not likely to be the only one. This year's fourth quarter has been disastrous for banks. Even Deutsche Bank was hard-hit. According to estimates by JP Morgan, Deutsche Bank will have to write off an additional €2.3 billion ($3.2 billion), leading to widespread speculation over whether the industry leader will be able to manage without government funds in the long run.
Deutsche Bank CEO Josef Ackermann wants to avoid the walk to Soffin, only a few hundred meters from his corporate headquarters, at all costs. His name has been closely associated -- in good and bad ways -- with the government's rescue package from the beginning.
Ackermann was the first to call for a general bailout for the industry.
But the government is also convinced that Ackermann stigmatized the package when he said, at an internal event, that he would be ashamed to see his bank requesting help from the government.
Finance Minister Peer Steinbrück was livid when he heard the news. Ackermann, he said, had paved the way "for a two-class society in the banking sector: into those that don't need help and those that are at risk of relegation. This is dangerous, because the markets respond to it." A man like Ackermann should have known better.
At a Dec. 14 economic summit at the Chancellery, the office of Chancellor Angela Merkel, Ackermann proposed the idea of what he called a Bad Bank -- a government institution that would buy risky securities from the banks and hold onto them until they matured. In this way Deutsche Bank, too, could shed excessively high-risk securities without having to apply directly for government assistance.
It is already possible to transfer bad loans to Soffin as part of the rescue package. But no one has made use of this option yet, because the toxic loans can only be outsourced for three years, at which point they are transferred back. This restrictive provision led to the failure of talks between Postbank and Soffin. Postbank wanted to get rid of high-risk securities worth €5 billion ($7 billion). If the bank had come to an agreementwith Soffin, Deutsche Bank would also have benefited from the government bailout, because it recently became a major shareholder in Postbank.
Approaching Soffin directly would come at a heavy price for Deutsche Bank and its chief executive. Ackermann has stated his position so adamantly that he could hardly hold onto his job if his bank were forced to apply for government bailout funds.
Soffin already has its hands full. Hillenherms, who sees everything from minor exploratory inquiries ("What would it cost us to secure equity capital from you?") to urgent calls for help ("We'll be bankrupt tomorrow") cross her desk, is currently reviewing a preliminary inquiry from Aareal Bank. The publicly traded mortgage lender is not in critical straits but merely wants to recapitalize, says an individual familiar with the situation.
Aareal Bank has not submitted an official application yet, but its options include guarantees as well as equity capital injections from the government. The bank has declined to comment.
Too Slow
Many applicants complain that Soffin is taking far too long to process their requests. It can take weeks before they are even looked at, and applicants say that the decision-making criteria are vague.
The 21 employees at Soffin, most of them on temporary loan from the Bundesbank, see themselves as whipping boys, forced to take responsibility for everything that goes wrong in the bank rescue effort.
Karlheinz Bentele, the former president of a savings bank and a member of the managing board of Soffin, returned to his regular job after only a few weeks. Soffin Director Merl has yet to sign a valid contract, and the names of potential successors are already being mentioned in the industry, including that of former Finance Minister Hans Eichel. The source of the trouble is a tangible dispute over competencies. Even though Merl heads the managing board of Soffin, a steering committee must approve key decisions. The Finance Ministry and even the Chancellery are involved in major cases.
A senior staffer at Soffin complains that the agency operates in a gray zone between business and politics. This is complicated by the fact that even the government's representatives cannot always agree on what the right approach should be.
What is clear, though, is that the system cannot continue in its present form. The weaknesses are all too obvious, including those of the underlying legislation that created the system. As long as old toxic debt can only be outsourced for three years and is capped at €5 billion ($7 billion), a permanent clean-up will be impossible.
The risks continue to hover around the banks. Even senior Soffin representatives are now convinced that the creation of one or more Bad Banks, as Ackermann proposes, is inevitable. Finally, the government will have to clarify when and under what circumstances banks should be nationalized.
Most of all, however, the money market needs to be revitalized. Before the crisis, the banks would lend each other up to €500 billion ($700 billion) every day. This flow of money back and forth between banks during normal times is extremely important for the economic cycle. It ensures that the banks use the capital available to them in an optimal way. This, in turn, benefits corporate customers that require larger loans.
Conversely, if this interbank market no longer functions properly, the banks must stockpile liquidity -- that is, form reserves -- to be able to service all obligations at all times. As a result, they are left with little or no latitude for new business. Mid-sized companies, in particular, are currently feeling the impact.
A government clearing house could be a possible solution to this problem. Banks would no longer lend money directly to other banks.
Instead, all cash would flow through this central clearing house and would be guaranteed by the government. The Bundesbank has been asked to examine such a measure, and the government plans to discuss it in January.
But what happens if this solution is also ineffective? Or if the banks start lending money to each other again, but not to companies, because they see commercial lending as too risky?
If that happens, the government will face calls to start lending money to companies directly.
Reported by BEAT BALZLI, ARMIN MAHLER, CHRISTOPH PAULY AND WOLFGANG REUTER.
Translated from the German by Christopher Sultan
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