Of all the giant investment banks to survive the financial crisis, the one with the greatest lingering issues seems to be Deutsche Bank. That is according to David Enrich, Finance editor at the New York Times. His latest book is “Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction.”
Enrich discusses how Deutsche Bank changed from a sleepy, provincial bank focused on serving local German companies into a global juggernaut. They were early proponents of using derivatives both as hedge to client positions, and then later as a profit engine.
Deutsche Bank’s rise and fall began with the 10 billion-dollar purchase of Banker’s Trust in the 1990s. Enrich explains how a “great migration” of 1,000s of traders from firms like Merrill Lynch and UBS to Deutsche completely changed the nature of the firm’s revenues, power structure and culture. Even the bank’s official language changed from German to English.
The bank’s internal supervision — as well as regulators in the U.S. and Germany — failed to adequately stay on top of the massive growth of assets and risk at the bank. The technology of the bank was a terrible patchwork of incompatible computer systems unable to track all of the banks positions. The bank was unable to monitor in real time (or even quarterly) its own risks and positions.
Enrich describes how Deutsche Bank became then real estate developer Donald Trump’s sole Wall Street banker in the 2000s. After Trump defaulted on a loan for a Chicago Skyscraper, he was banned from one of the bank’s lending division, but somehow managed to become a client of a Private Banking division. Trump becoming President led to a whole new level of complications for the bank.
A long list of his favorite books are here; A transcript of our conversation is available here.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Overcast, Google, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Simon Hallett, Co-CIO at Harding Loevner, which manages about $70 billion dollars. Hallett is also the owner of Plymouth Argyle Football Club, a League One team based in the city of Plymouth, Devon, England.
