Transcript: David Enrich




The transcript from this week’s, MiB: David Enrich on Deutsche Bank, is below.

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MALE VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have a special guest. His name is David Enrich and he is the Finance Editor at the “New York Times”. Previously, he was a journalist at “The Wall Street Journal”.”

Last time we spoke with David, it was when his new book, The Spider Network” came out, that was back in 2018. All about LIBOR manipulation. His new book is “Dark Towers.” It’s all about Deutsche Bank and how what was once a sleepy backwater German bank — OK, they also helped fund the Holocaust and the Nazi war machine — but how they ended up having global aspirations in the ’90s and 2000s, briefly becoming the biggest bank in the world before an epic collapse.

David is a really interesting investigative journalist. He does a wonderful job fleshing out the characters in his book who are all real people. This isn’t fiction. He is telling a story about what happens, how it happens, and why and he had access to a treasure trove of documents and emails in the Deutsche Bank story. It’s just utterly, utterly compelling. If you’re at all interested in stories of malfeasance at giant financial institutions, this is up there with when genius failed and other such issues. Only, this one involves criminality, not their trading decisions.

So, with no further ado, my conversation with “The New York Times'” David Enrich.

MALE VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: My special guest this week is David Enrich. He is the Finance Editor at the “”New York Times.” Previously, he was an investigative journalist at “The Wall Street Journal”. He is the author of several books, most recently “Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction.” Previously, he wrote “The Spider Network,” a book about the LIBOR manipulation. David Enrich, welcome back to Bloomberg.


RITHOLTZ: So, we had you on a couple of years ago to discuss “The Spider Network” which I thought was a fascinating tale. It read like a spy novel, almost. And a very short period of time elapsed between that book and “Dark Towers.” Obviously, there’s some overlap with LIBOR and Deutsche Bank, but why so quick between the two books? How did the new one come about?

ENRICH: Well, why so quick is the same question I’ve gotten from a number of people including my wife. And the reality is, when you’ve got a good idea for a book, they don’t come around that often, at least not for me. And they kind of jump at it, the opportunity, while you can.

And in this case, I mean, I’ve been obsessing about Deutsche Bank for really the better part of the decade. Back, I’ve been working with “The Wall Street Journal” in London from 2010 and 2016. And during that period, I was covering banking and finance. And the biggest most troubled bank of that time was Deutsche Bank and it was pretty technical and industry-specific story. It was not something that captured much public imagination, I don’t think, outside of the finance world.

Though with the election of Donald Trump and given his very close ties to Deutsche Bank over a long period of time, the story kind of started (ph) becoming a much more palatable for the general public. And I felt like I was in a really good position to tell that. So, I — just grab the opportunity while I could.

And I do wish, in hindsight, it’s hard writing a book. It takes a lot of time and it’s labor of love, but also there’s object (ph) of complete and total obsession and I’ve got a little kid. And so, it’s not the easiest couple of years doing this.

RITHOLTZ: Especially when you’re writing about a topic that is changing in real time, ongoing investigations, ongoing stock price fluctuation, how did you deal with the fact that this story continued past when you put your pen down?

ENRICH: Well, that’s an interesting question. I made a decision pretty early on in consultation with my publisher that this is not going to be a book that told you everything in the world about Deutsche Bank and try to break a lot of news about the current ongoing kind of reorganizations of the bank and restructuring and things like that.

There was — there’s going to — as you probably know it, like 80 percent of the book, like 70 percent of the book is the story of how Deutsche Bank grew from this provincial, really, German focused bank into this global juggernaut and then into this epic disaster.

And so much less of the book is spent focusing in the past, basically, from the 2016 period, 2017 period onward where the bank has been in this pretty hardcore clean-up mode.

And so, I had the liberty of just kind of drawing a line, basically around the time that shortly after the time, that the bank’s leadership changed for the 18th time. And so, I really — that made it a lot easier to kind of put blinders on.

Obviously, I focused — I paid a lot of attention to what was going on with the various reorganizations and the new leadership and I spend a lot of time talking to people who are involved in that. But it was — I was not particularly worried about every little incremental twist and turn as related to the bank and its financials.

I was much more interested, frankly, in — in terms of things that were moving as I was writing, as it related to investigations on money laundering and Donald Trump. And so, I spent — I did spend a lot of time, both in the book and also doing reporting and writing for the “New York Times” on those kind of live topics.

The other things that were much more coming out of Germany, right, just — in addition to not (inaudible) to the narrative in the book, I also just simply wasn’t as well sourced.

So, I kind of just narrowed my field of vision a little bit which I think was — there’s a little bit of a gamble, and I think it will — frankly, it will probably make the book a little less satisfying in some ways to a certain slice of the world that is really obsessed with understanding where the bank currently is.

But I think, for the vast majority of readers, it’s a pretty good look at how the bank and — how the bank got into so much trouble and how big companies, in general, get in so much trouble and looking at those decisions and incentives that are set up along the way that really lead down to this pretty disastrous path.

And to me, Deutsche Bank is just this classic case study and how — not only how not to run a business but the perils of growing too fast and incentivizing people to essentially make this very bad decisions over and over again.

RITHOLTZ: So, you hit on exactly a question I was going to ask later but I might as well ask it now, when we look at some of the biggest disasters of the past decade, whether it was the collapse of WeWork’s or all the trouble that Uber got into or go back to Lehman Brothers, Deutsche Bank did many of the same things, disregard full legality, incentivizing people for profits regardless of the consequences. Effectively, short-term versus long-term greedy. Is that a fair assessment of Deutsche Bank?

ENRICH: Yes. Absolutely. I think that the bank — and I think it’s actually deeper than that in some ways. I mean, banks are obviously kind of peculiar beasts, right? I mean, they are entrusted with, essentially, operating the economy to a large extent for the entire world.

And so, unlike in Uber or Wework which is important to readiness (ph), kind of transformed the way we live or work, it’s bank occupy this very special role at the heart of the financial system, and therefore, the heart of the economy. And to me, there’s one of the most important shift that take in place in the level of finance in the past, I don’t know, 30 years at this point, I guess, is the transition from banks being viewed as these kind of the profitable but not egregiously profitable.

That really — there’s been much more, like, public utilities and they’re to kind of grease the gears of the global economy. And this transition that took place, it coincides largely, it’s a big Wall Street firms going from private partnerships and to publicly-traded companies and then later becoming banks toward the just ridiculously fat profit margins has been — it’s been very destructive to the banks themselves in many cases but it’s also been very disruptive for the economy and for the financial system, I think.

And so, Deutsche Bank’s transition from being this pretty plain, vanilla, German lender that was primarily focused on helping big German companies spread their wings internationally and into a lesser extent helping non-German companies enter the German or European markets.

And those were very steady businesses and very important business. And Deutsche Bank, as a result of that, played a leading role in the development of real growth in the 19th and early 20th century. It played a leading role in the reconstruction, redevelopment of Europe after World War II.

And going into the mid-90s and as the Iron Curtain fell, it played — the bank played a leading role in helping to mobilize the economy and knockdown unhealthy barriers to economic development in some countries. And I know it’s a — the bank’s CEO in up until the late 1980’s was a leading advocate of forgiving third world debt, for example.

And so, it was a bank that occupied this role. Not only providing banking services, but was — it viewed its role as kind of essential and intertwined with the fate of Germany and the fate of Europe. And that shifted very dramatically starting in the mid-1990s from the bank that that cased (ph) for Wall Street and decided that it was going to prioritize short-term profits above everything else.

And I think we’ll probably get into this later but that led to a complete transformation of the bank’s culture and one where, literally, the only thing you were supposed to look at when deciding whether to do a certain transaction or to bring on a certain client or make certain investment to the business was what will the impact of this decision be on our profits this quarter or maybe this year? But there’s no consideration to what will this do to our reputation, what will this do to our business five years from now? Is this sustainable? Is this smart?

And that — that kind of just blinders on, short-term decision-making has — we anticipate little consequences and in a business-like banking that is highly levered, the seriousness, the gravity of those mistakes is dramatically amplified.

RITHOLTZ: To say the very least, removing the risk from the risk reward analysis naturally leaves to certain outcomes.

So, let’s talk a little bit about that rise and fall we discussed earlier. In the 1980s and ’90s, Deutsche Bank was a sleepy regional bank in Germany. Twenty-nine percent of its profits came from investing banking and once this transformation and embrace of derivatives and aggressive risk and trading and leverage took place, that shot up to 85 percent a year later. How did this happen and how did it change the culture at Deutsche Bank?

ENRICH: Well, there — there’s kind of two really — very related questions. And the way it happened is that starting in the mid-1990s, the banks leaders saw that the big American banks were making a tremendous amount of money on Wall Street and also make a tremendous amount of money in kind of encroaching on the turf of European banks like Deutsche Bank and Goldman Sachs famously won a big deal taking Deutsche Telekom private.

And that that was a kind of assignment that had traditionally gone to the hometown (ph) banks, European banks. Instead, Deutsche Bank got a role on that deal, the Goldman Sachs as the lead. And that was a huge wake-up call to Deutsche Bank executives that executives that Wall Street was coming to invade their turf, maybe it is time for them to go invade Wall Street’s turf.

And so, starting in 1995, the bank went on this epic hiring spree where it brought in, initially, a small group of failed men and traders from Merrill Lynch and basically gave them a blank check to hire as many people as they could. And they went on to hire thousands of people from the big Wall Street firms at the time very, very quickly.

And that very quickly transformed or began to transform the culture from an institution that was primarily a German one to one that was much more international. And the local (ph) power started to shift slowly but surely from Frankfurt and Berlin to London, and a lesser extent, New York.

And even with spending billions of dollars, hiring thousands of people in this very fast minute, the bank got much bigger especially in derivatives. But it still was kind of a second tier, maybe even third tier player on Wall Street, and in many other — many markets around the world.

So, in the late 1990s, so a few years after it started this expansion, the bank decided that it really needed to double down on the spread sheet (ph). And so, they went shopping for a big Wall Street firm to buy. And the — they were looking at the likes of Merrill Lynch, Lehman Brothers, and Bankers Trust, which of the time was kind of one of the most swashbuckling firms on Wall Street.

It was in pretty serious financial trouble because of very bad bets it made on derivatives. And the Fed was actually looking for a stronger financial institution to come in and acquire Bankers Trust, so basically take the mess off the Feds’ hand. And so, the Feds learned that Deutsche Bank was in the market for a deal and kind of brokered this agreement where Deutsche Bank, in 1998-1999, would spend $10 billion to buy Bankers Trust.

And so, that deal happened and almost overnight, the bank was transformed. I mean, as you mentioned, the share of the bank’s overall profits that came from investment banking and sales and trading went up, more than tripled, basically, at the stroke of the pen. But in all, the more important, really, just completely changed the bank’s culture.

I mean, the power had gone from being in Germany, to now it’s clear that since the overwhelming majority of the bank’s profits were coming from London and New York, that’s where the power centers should be.

And so, there were kind of very — there’s some cosmetic changes that were, I think, pretty symbolically. The bank’s official language went from being German to English. But the more important ones were that the supervisory board of the bank which was primarily consisted of German industrialists and corporate chieftain, and even labor leaders was completely — it was just neutered essentially.

And instead, mandate became, look, we’re going to step on the gas. We want to be as big as we can, as profitable as we can, as quickly as we can. And so, the bank just underwent this really revolutionary change where they — they had metrics that measured how profitable they were and how quickly.

And that was — they were using a metric called return on equity which traditionally a bank’s return on equity would be in the maybe high single digits, very low double digits. And the newly appointed CEO in 2002, Joe Ackermann, who is himself a Credit Swiss veteran came in and said that we want, in the next two years, for our return on equity, to go to 25%.

And that was a huge — Deutsche Bank, at the time that he made that prediction, I think the return on equity was four or five percent. So, he was basically calling in a period of two or three years for that increase, what, 600 percent, I guess. Which is (inaudible) and the crazy thing is they achieved it.

And he, by the mid-2000, Deutsche Bank had gone — become one of the most profitable places on the planet. And the — but again, this isn’t — the way they achieved that was, really, it wasn’t that complicated. They started evaluating every transaction and every client they did based on its — the return on equity. So, they were not going to be able to make a 25% profit on a loan or another transaction, they simply wouldn’t do it.

And if a client, like a German midsize business, for example, wasn’t going to that relationship, wasn’t going to generate that huge return, they would drop the client.

And so, the reality was that most of the business, the bank had been doing in Germany was not all that profitable. And partly, as the German banking system has this huge (inaudible) bank, so there’s intense competition which drives — press (ph) its way down.

RITHOLTZ: So, let me, let me circle back to something you said before we drift too far away. The supervision of the bank, what is the Vorstand (ph) — I don’t know how to pronounce …

ENRICH: Yes, the — well, there’s (inaudible). The Vorstand is management board and then there’s the supervisory board which is really supposed to be the oversight board.

RITHOLTZ: So, between those two entities and the Federal Reserve and the various regulators in the U.K. and the regulators in Germany, how did Deutsche Bank manage to skirt regulations to skirt risk management to hide losses, to do all these things that bad banks have a tendency to do for years and years and years. This went on for almost two decades, didn’t it?

ENRICH: Yes. And you would think given the number of regulators that essentially (ph) overseeing the bank, you would think that it would have been very hard for them to do that. And the reality is the exact opposite which is that there — there was a patchwork of weak regulators all over the globe and the bank very adeptly, played those regulators off each other. So, the result was that almost no one was actually doing substantive, kind of hard-nosed oversight of them.

And BaFin which is the German bank regulator was — was and is notorious for essentially playing defense on behalf of hometown companies. And so, BaFin would essentially demand that any regulatory inquiries, let’s say from the U.S. or the U.K., had to be routed through this labyrinth of German bureaucracy and would, in some cases, just prevent the banks and complying with regulatory requirements from outside of Germany.

And the Fed, for its part, which was really supposed to be aggressively overseeing a large swath of the bank’s U.S. business, if the Fed knew that there were really serious problems (inaudible) and whether there was weak defenses against money laundering or did the quality and integrity of the financial data the bank was producing. And over and over again, the Fed voiced these concerns to Deutsche Bank starting around 2002 and over and over again, the bank did not thing to actually address the Fed’s concerns.

And on a number of occasions, the Fed came in and punished the bank that these were punishments that were — to describe them as light touch would be really — that would be exaggerating it. It’s — they were not even imposing any monetary penalties. They were not publicly admonishing any executives (ph).

They’re just very weak written orders. And the bank and executives I talked to said explicitly that the fact of the matter is, they knew that the consequences for misbehaving were not really that severe. And so, and the benefits to misbehaving, in some cases, were very attractive and they could make a lot of money providing services like money laundering or money transfer services to countries that were under U.S. sanctions. And it’s a pretty easy decision for them.

RITHOLTZ: Quite fascinating. So, let’s talk a little bit about Russia and Deutsche Bank and Trump. And I have to start with the question how is it that Deutsche Bank was the only bank in the world that actually would lend money to Donald Trump. What’s the background there?

ENRICH: Well, the background is that banks, as a general rule, don’t like lending money to people or institutions that have a tendency of defaulting on their loans. And that is a pretty good description of exactly what Donald Trump was in the late 1990s. And he had repeatedly defaulted or his companies had repeatedly defaulted on their debts.

And as a result of that, mainstream financial institutions were very, very wary about doing any business with them because …

RITHOLTZ: Wasn’t Deutsche Bank considered a mainstream financial entity? How different were they from JPMorgan or Bear Stearns?

ENRICH: Well, in the U.S., they were very different. And this was the period where Deutsche Bank was trying to really establish a name for itself, make inroads in the U.S. It was more or less a non-entity at the time.

And so, the bank set out to try and build a business. In particular, business of commercial mortgage-backed securities. So, basically making big real estate loans and then packaging those into bonds.

And the key — the first key step to that is finding commercial real estate clients to lend to and they — it was very hard for them to establish profitable relationships with kinds (ph) of big names in the commercial and real estate. They were already banked by much bigger banks like JPMorgan or Bear or Citi.

And so, they had to go kind of fishing for the scraps. And it just so happened that Trump at the time was in need of money himself. And so, they paired up and it’s kind of a match made in heaven. You have this bank that’s desperate for clients in the U.S. and you have this businessman who’s desperate for a bank.

And so, starting in 1998, the bank made several hundred million dollars of loans to Trump in a very short period of time and they’re basically off to the races from there.

RITHOLTZ: What’s fascinating is Trump had a relationship with Deutsche Bank and then he stiffed them on a loan and came back to that same division and was soundly rejected but somehow managed to talk a different division into making a new loan term (ph). Could you — so, essentially, one division paid off the loan to a separate division. Could you explain that?

ENRICH: Yes. This is actually not the first time this happened at Deutsche Bank. There are at least two other occasions where the bank — one part of the bank made a loan or issued debt for Trump and he defaulted and he was off limits for that division and then comes back to another division of the bank and finds where they do business with them.

The most famous example of this is in 2008, he defaulted on (inaudible) loan to finance the Chicago Skyscraper and there’s all sorts of litigation where Trump sues the bank. And eventually, they reached a settlement that says Trump has to repay a certain portion of that loan in a couple of years and so that brings you to 2011 and Trump reached — Trump through Jerry Kushner, his son in law who had a relationship with a private banker at Deutsche Bank named Rosemary Vrablic.

Kushner introduces his father in law to Rosemary Vrablic who works in the private banking division and basically Vrablic and her boss make a decision go to Baton Rouge Bradley introduces his father-in-law to grab what bank is and it basically grab look and her boss make a decision that even though the bank has been burned by Trump, even though he’s off limits to the most of the bank, they are willing to take that risk and start a new relationship with them, bring them on — bring them back on as a client.

And so, the bank makes a couple of loans to him starting in early 2012, one of them is to finance the acquisition and renovation of the Doral golf resort in Florida but the other is, I believe, a $48 million loan to reap — that’s used primarily to repay what Trump still owed as different position (ph) at Deutsche Bank for the defaulted loan on the Chicago tower.

And that is, I don’t know, I’ve been covering banking and finance for almost 20 years now and I’ve never seen anything like that. And I still talk to people in the banking world today who are just kind of, their job distraught (ph). So, I don’t think — it’s not something that our normal bank with proper risk management and a good cohesive internal culture would ever dream of doing and for obvious reasons, right? it’s embarrassing for the bank, the bad credit risk and the potential reputational damage of getting back in bed with this guy after he’s already stiffed you multiple times, it just doesn’t make much sense.

RITHOLTZ: Right. Quite amazing, I love the anecdote within the book about Trump’s relationship with Bear Stearns. He was buddies with bears CEO Ace Greenberg. And even though Ace and him are friends, Ace won’t sign off on a loan and the poor banker that has to call Trump to tell him that Ace said no has this brilliant way of letting them down.

And he says to Trump, Ace loves you. The reason he does want to do it is because he told me there are four guys in the world he doesn’t want to be on the opposite side of the table from, Bill Gates, Warren Buffett, Henry Kravis, and you. How on earth could such a transparently butt-kissing ploy work on anybody?

ENRICH: It was — it’s really — it was perfect. And it’s perfectly tailored to the client in this case. And I sometimes as a skeptical, cynical journalist, I roll my eyes when investment bankers, brag (ph) most about their skills and how valuable they are.

So, I’ve got to tell you, when I heard this story relayed to me by the banker who pulled this off, I was just so impressed. It real — in addition to being hilarious, it’s just — he knew his client, he understood the psychology of his client, and managed it perfectly.

RITHOLTZ: Let’s talk a little bit about Deutsche Bank, what sort of ties did Jeffrey Epstein who even after he’s been dead, still keeps popping up in the news. What sort of ties did Epstein have to the bank?

ENRICH: Well, Epstein’s relationship with the bank is not as long as the bank’s relationship with Trump but in a lot of ways, it’s much more egregious. And Epstein starting — around 2012, Epstein’s long-time bank JPMorgan decided that it could not continue to do business with him. And partly (ph) he’s been publicly convicted of sex crimes and there are all these rumors flying around about continued stuff that he was doing whether it was being a predator or money laundering.

And so, they cut ties — JPMorgan cut ties with Epstein. And within months of that decision to cut ties with him, the banker at JPMorgan who had managed the Epstein relationship left JPMorgan and was hired by Deutsche Bank.

And as far as I can tell, one of the first things he did upon walking in the doors at Deutsche Bank was to convince his superiors that they should — they should initiate a relationship with Jeffrey Epstein. And very quickly, the bank brought Epstein on as a client and started not only lending him money but providing all sorts of account management and cash management services, all these shell companies he was creating.

And the relationship lasted up until almost last summer, basically. And just very shortly, before Epstein was arrested and charged with operating sex trafficking ring.

And again, the really remarkable thing here is not so much that they — the bank was willing to take risks on a client the other banks found unacceptable because that is — we guessed — we already knew that about Deutsche Bank. It was really remarkable in this case that a number of employees up and down the food chain at the bank, there’s really serious concerns about this business.

And there is — there were concerns about doing business with a convicted criminal, there were concerns about all the rumors swirling around about his continued criminality and there were concerns from anti-money laundering mobsters inside the bank, that he was using the bank to launder money.

And time after time, those concerns were voiced to executives up the food chain and discussed by executives at a pre-senior level within the bank and the concerns were just tossed aside. They’ve decided the risks were not so severe that it would justify ending a relationship that is turning out to be quite lucrative for the bank.

RITHOLTZ: So, let me push back on your earlier statement that Deutsche Bank’s culture has changed. And I’m going to go someplace from the book that I wasn’t planning on but I now have to based on what you just said. Deutsche Bank is the entity that effectively funded the construction of concentration camps at — under Hitler, that they were essentially Hitler’s banker. They fired all of the senior management’s who were -Jewish, they confiscated a lot of Jewish assets.

Deutsche Bank was a really bad actor during the period leading up to the war and during the war. So, the question I have to ask is, how is this morally bankrupt corrupt entity today any different than the bank that helped fund the Nazis?

ENRICH: Yes. That’s — I mean, that’s a good question. As — and you’re totally right, first of all, that Deutsche Bank was, as I say (inaudible) to genocide. I mean, it was a criminal enterprise. The U.S. wanted to dissolve Deutsche Bank after World War II because its participation in war crimes. Its CEO was tried and convicted of being a war criminal.

And, I mean, look, there’s, I think a danger in equating the crimes that took place and the genocide that took place and the war crimes that took place with the crimes that Deutsche Bank is has committed in the past 20 years and the crimes in the Holocaust were just, I think unique and just uniquely awful.

And it I’m not sure anything they’ve done today really compares to that. But I also think that that was — and I’m not at all trying to defend the bank’s conduct during that period because it’s indefensible. But that was an extraordinary moment in corporate Germany and there were a lot — in fact, most of the big German companies at the time participated one way or another in genocide and whether it was chemical companies manufacturing poison gas or banks helping finance the Nazi war effort.

And a lot of those companies or auto manufacturers making cars or tanks or things like that. And a lot of those companies still exist today and — so, I’m not sure — it’s and I’m kind of struggling with this answer because I don’t want to — it all sounds like I’m justifying or defending the bank’s actions during that period. But, look, they came out of World War II and they did change and they played, as I said earlier, a leading role in the reconstruction and redevelopment of Europe.

They admitted their crimes and apologized for their crimes during the Holocaust which does not make it right, but at least in a small step towards making it right. And …

RITHOLTZ: And some …

ENRICH: And they …

RITHOLTZ: … and reserves also, right? Didn’t they right some big checks?

ENRICH: Yes. Yes, they did.


ENRICH: And they — like much of Germany, they spent the better part of the past century apologizing and trying to make right the awful crimes that they committed.

RITHOLTZ: All right. Fair enough, let’s go from Jeffrey Epstein to genocide to something little lighter. Let’s talk about Russian money laundering and Deutsche Bank’s role, tell us about the paired trade situation that Deutsche Bank came up with that allowed Russian oligarchs to move rubles into dollars pretty seamlessly?

ENRICH: Yes. Well, just — even before we explain that, I mean, it’s worth nothing that Deutsche Bank for, basically, ever, for most of its existence, has been making a lot of money by providing banking services in Russia that most of the rest of the world, for one reason or another did not seem — did not seem as a particularly good idea.

And so, there’s — they initially were financing railroads for the czar and that shifted to serving the communist government. They’re basically nonstop with the brief exception of World War II.

And then starting in the early 2000, this new class of oligarchs emerged, Deutsche Bank was one of the only western banks operating in Russia and basically assisting these Kremlin-linked oligarchs and moving their money out of the — out of Easter Europe and into the western financial system whether that was into the euro zone or into the U.S. financial system. And so, it’s starting …

RITHOLTZ: Describe — describe those Ameritrade. Describe those ameritrades (ph) because it’s a fascinating methodology and it’s kind of shocking, no — none of the regulators picked it up very quickly.

ENRICH: Yes. So, I think the simplest way to describe this trade is that they taught ameritrades (ph) because they’re two trades to take place, basically, simultaneously that will reverse (inaudible) with each other.

So, in Russia, you would have an oligarch and the result of those trades is that money goes from being rubles to be in most likely euros. And so, in one example, a Russian will basically purchase a bunch of blue chip shares of a company using rubles to acquire the shares.

And then in a separate transaction that takes place simultaneously with the same amount, a shell company headquartered in maybe someplace like Cyprus which is part of the eurozone but very lightly regulated will sell that the same number of shares that were just bought by the Russian and the result is that the Russian spent his rubles buying shares and the Russian who controls the shell company has also liquidated those shares in Cyprus and raised the same amount of money in euros.

And so, just like that, with the help of Deutsche Bank moving the money back and forth between the Russian and the shell companies, the — just like that, you’ve got — you once had rubles, that are now euros and your money in the European financial systems.

So, it’s fairly — I mean, it’s much complicated than I just said but it — the nuts and bolts of it are actually pretty simple and kind of elegant in their simplicity, I think. And again, a normal bank with proper checks and balances and internal controls in good computer systems would have spotted this pretty quickly because they would’ve seen that there are these two simultaneous transactions, often quite large transactions taking place instantly at the — as the executing (ph) time and the exact same amounts and involving the shell company linked to Russians.

And that would raise a lot of red flags at a normal healthy financial institution. Deutsche Bank was not a normal healthy financial institution.

ENRICH: So, let’s talk a little bit about your writing process in the book. We could talk more about oligarchs and bad actor states and how Deutsche Bank laundered money for them. But I think people get the sense we all would have been better off if Deutsche Bank would’ve been given a corporate death penalty after World War II, that was a mistake and I don’t want to dwell in that.

Let’s talk instead about your writing about the book, there’s an incredible amount of detail and character development in the book including some of my — the fifth — the most interesting people within the book are really fleshed out. How did you go about writing this and how much research did you put into figuring out who this huge cast of characters were and how they well interacted with each other. It’s quite a giant puzzle.

ENRICH: Yes. I mean, the bottom line is I just read a lot and I read, I think, I did my best to read every single thing that had been written about Deutsche Bank from the mid-1980s to the present day. And so that was an extraordinary amount of background research, not just in the media but in academic papers and government documents, in lawsuits, things like that.

And then I just set out to meet as many people as I could who had been involved for — work for the bank. And that ranged from people and I started with people who had been at a pretty high level inside the bank and almost none of those people are still working there.

And one of the extraordinary things that Deutsche Bank, more than any other bank I’ve ever encountered in my career, is that almost everyone who leaves Deutsche Bank does so with a very bitter taste in their mouth. And so, a lot of those people were willing to talk to me, based on the — basically, because they could — they knew that everyone else would have their knives out and they wanted to protect themselves and tell their side of the story preemptively.

And so, for a journalist that is this just a very nice phenomenon to be experiencing because everyone is eager to tell their side of the story because they assume everyone else is going to be talking talking.

And so, there was — and you just sit down with these people over drinks or dinner or breakfast. And that you — you just ask them to tell you stories and the stories were extraordinary and a lot of these — these are very smart people even though a lot of them made very serious mistakes.

And they have good memories and a lot of them has documents that they — contemporaneous documents that they kept. And so, yes, and I spent, I don’t know, many, many, many hours interviewing and spending time within scores of these people.

RITHOLTZ: So, let’s talk about probably the only decent character in the whole book. Bill Broeksmit? Am I pronouncing his last name right?

ENRICH: Broeksmit. Yes.

RITHOLTZ: Broeksmit. So, he is the person who essentially invented the form of derivatives and derivative trading that Deutsche Bank built all its initial wealth on. And he understood risk management better than anybody else in the bank.

And even after he leaves the bank, he stays on as a consultant and continues to internalize all the bad behavior and feels guilt for everything that he’s not doing, others are doing and profiting on, and ultimately, commit suicide for the sins of others. How was it researching him and tell us about his son, Val, how much he helped in the entire process?

You wrote a big piece on Val at the “New York Times,” right?

ENRICH: Yes. That’s right. And Val — I mean, Val was indispensable to telling his father’s story and he’s extremely helpful in introducing me or not introducing, but pointing me towards a lot of the people his dad had worked with.

And shortly, after his father’s death in 2014, Val gained access to his father’s personal email accounts which, for a variety of reasons Bill Broeksmit had been using for a lot of his Deutsche Bank work. And so, and Val shared hundreds, if not thousands of those emails and documents from those Gmail and Yahoo! accounts with me.

And so, that provide — and that’s another way, by the way, that I was able to re-create some dialogue and it’s just — it’s vital. Val is a complicated person, as are we all. And it’s been a difficult relationship with them over the years. But he — he was very eager to — as he like to say cultivate his father’s legacy.

And though the legacy is worth cultivating and Bill, as you said, was kind of a legendary risk manager and legendary derivatives expert, I think more important either of those things, though, is that he was a man who had a conscience and had of ethics, and was not afraid to stick with those and really stand up for them when challenged by colleagues.

And Deutsche Bank was very short on people with strong ethical and moral compasses and Broeksmit stood out as — he was the conscience of the bank in a lot of ways. That’s the way a lot of his colleagues described him to me as.


ENRICH: And as you — as you said, he internalized a lot of the bank’s problems. And so, it ended up being kind of a tragedy in a lot of ways.

RITHOLTZ: Very much so. And I love — I’m up to the part in the book where so Val is the adopted step son. Bill leaves seven suicide notes for various people including one for Val who’s kind of been a near-do-well, a little bit of a junkie and a musician, but he finds a new purpose in life trying to clear his father’s name.

And through an organization, Guardians of Peace, he learns how to become a hacker a little bit, set up WiFi packet sniffing, and literally drives from California and New York in order to so set up a packet sniffing sting to get his stepmom’s email passwords, they’re somewhat estranged. He’s on a $2,500 a month allowance, but never inherited any real money after his father died. Tell us what Val discovers in his mother’s email account?

ENRICH: Well, there are two kind of main categories and one is that that he discovers all of these documents that pertained to Deutsche Bank’s efforts to essentially cover up some of the reasons that Bill Broeksmit had committed suicide.

And he finds that there is a bank — the bank had conducted this kind of very slipshod internal review of circumstances of his death and some other stuff as well. And then secondly, he finds all these suicide notes. And all — and two of them are to family members. One is to a family friend and the final one is to the bank CEO at the time, Anshu Jain, and it lays out in a heartbreaking detail what Bill Broeksmit blamed himself for.

And I don’t want to — I won’t spoil that for everyone. But there’s — it really — it’s — to me, it’s really heartbreaking. It also a testament to Val having — worked really hard to unearth this stuff without really knowing what the payoff was going to be and it — motivated by this stew (ph) of really complicated personal and emotional familial factors that are — any of us can probably kind of imagine.

And, Val, as you said, has this terrible falling out with the family, frankly, had a terrible falling out with me, too. And I think it is — just a reminder that whistleblowers take many different — takes many different forms and Val is not a conventional whistleblower but this — the service that he has provided to the public by exposing all these Deutsche Bank stuff, I think, is really undeniable and audible.

RITHOLTZ: Yes. No doubt about that. I’m reminded of what he discovers in his stepdad’s suicide note to him, essentially saying, hey, you’re the only one worthy of carrying on the Broeksmit name and I’m proud of you as my son. I wonder if that just laid Val’s worst fears and gave him some motivation to do all the things he did.

A lot of what we now know about Deutsche Bank and how they hid giant losses during ’08-’09 and how they lied to regulators, none of that would’ve come out — the Fed — the Federal Reserve letter warning that they were in trouble, none of that would come out without Val Broeksmit. Is that — is that a fair statement?

ENRICH: Yes. I think — and there was a tremendous amount that would — in fairness, there were a lot of other whistleblowers, too, then really helpful to me and to other journalists and the regulators over the years. I don’t want to give Val all the credit for that.

But there’s no — look, Val has been — our ability to understand Deutsche Bank’s very oddly (ph) inner workings is, in large part, due to Val’s efforts to get the stuff in the public domain. And everyone can question Val’s character and his mother does (ph) some things like that and I, frankly, have, from time to time, myself. And — but, again, there’s really no denying the public service that he has provided.

RITHOLTZ: So, you mentioned you a falling out with him. Tell us what you can about it, what happened, is he happy with the book, is he unhappy? He doesn’t come across as a bad guy, he comes across as kind of a person having a hard time finding his place in the world and a little bit of a junkie. But does perform a service. What is going on with him and how does he feel about the book?

ENRICH: I think he — I mean, I’m a little wary of putting word in his mouth. But my understanding is that he is very — he thinks the book accurately portrays his father’s life and work which is, look, for my perspective, that is something that I feel really good about.

I think he has had a lot of trouble reading my descriptions of him and I think Val has been — I got — I started getting to know Val just a few days after his father’s death. And so, I’ve been with him on this journey from early 2014 until now.

And it’s not like I know him that well, but I know him pretty well. I was talking to him every day, multiple times a day for the better part of four years and/or five years. And look, It’s painful, I think, to read difficult things about yourself and the New York Times or in a book and there are difficult things about him in the book.

Like, he’s a complicated, flawed person, as are we all. But he’s struggled with some emotional issues and substance abuse issues. And I think it’s hard for anyone to read those things. So, we’ve had — mean, we — it would be an unfair statement for me to describe Val as being angry as me.

He is, like, serious with me. I think he would love to destroy me, probably. And which is very — that’s not a good feeling for me to have. And is, I guess, kind of just like an occupational hazard as a journalist when you get to know a source as well as this and it take — the relationship can take on tons of a friendship when, in reality, it’s not a friendship, right? He is a source and a subject of what I’m writing about and I’m a journalist.

And but I think it is very — look, I’ve learned a lot about myself and about like my own tradecraft in over the years working with Val and I’ve certainly made some mistakes along the way. And so, I don’t want to make it sound like, I don’t know. There is — I’m struggling a little bit here, again, because I don’t want to put words in his …

ENRICH: I get that. Right. That’s challenging. But there’s no avoiding that based on the book, what he found, the document throve, the emails, the — all of the things he found, completely changes not just the picture of Deutsche Bank but it paints, really, a full portrait of the depth of depravity that was going on at the bank during those years.

And if nothing else, I hope he’s pleased that he helped you get to a deep, dark, ugly truth about what was once one of the biggest banks in the world.

ENRICH: Well, I feel similarly (ph) and hopefully he’ll listen to this and be pleased to hear that you are reading the story as well.

RITHOLTZ: Well, it’s a fascinating story and really well told. I — before we get to our favorite questions, I just have to talk a little bit about your previous book which is somewhat similar in its scope of dealing with finance characters and illegality in criminality and that was “The Spider Network,” all about the LIBOR manipulation and that predates your contact with Val body by — you were contacted by a currency trader named Tom Hayes in 2013 who really was a savant when it came to this and kind of took the blame for what a lot of other people did.

Tell us a little bit about your relationship with yet another damaged person in the world of finance, Tom Hayes. How did that come about?

ENRICH: Well, I got to know Tom Hayes starting in, I guess, early 2013. So, this is about a year before I started my relationship with Val. And Hayes was, have been, for many years a very successful interest rate trader at the succession of good banks. And was criminally charged in the U.S. and arrested in the U.K. at the end of 2012 for being the alleged mastermind of the LIBOR manipulation scandal.

And I try to get in touch with Tom very shortly after he was arrested. And I’m sure I was among many journalists trying to do that. And I ultimately found a way in through a friend of his and a business school classmate of his who I spent some time with.

And she eventually introduced me — or I guess, she actually gave Tom my cellphone number in early 2013. And I was — didn’t really expected to hear from him but one night, I was sitting on the sofa in my apartment in London and got a text from an unknown number that said I’m willing to meet with you but I need to be sure I can trust you. This goes much, much higher than anyone realizes, even the Department of Justice.

And so, that was the start of a secret year’s long relationship I had with Hayes that eventually he agreed to make it public after his trial in 2015.

And so, I mean, that was — Hayes is mildly autistic. He’s got Asperger’s. And he is someone who has — it was definitely just fascinating relationship for me. Because he has — he’s a genius but he’s also, in some ways, just completely inept and have really struggled — he doesn’t — I simply would say inept.

He is — he is — he doesn’t communicate like people normally do in my experience, the other people in Wall Street.

RITHOLTZ: Right. He’s on the spectrum. He has problems reading social cues, he has problems understanding when people are lying to him. Easy to set up a guy like that to be the fall guy.

I assume by now, he’s out of prison. What’s he doing with his life these days?

ENRICH: No, he is still — he has gone from being in a maximum-security prison to being in much essentially an open prison. So, he can — he has some rights to be able to, like, go out into like society and have a job but he still has to go back to prison at night.

And so, he — I mean, he is, by far the person who has taken the most painful personal consequences, although I think anyone in the banking industry, since the financial crisis.

And he is just about the least likely person, you would think, to have that role. And again, he is — he’s someone who, I think, had trouble detecting some shades of gray and didn’t see that LIBOR manipulation was outright illegal and it was incentivized and encouraged by his superiors and his colleagues to do this.

And it did — and which is not to say he’s without blame. I mean, he’s certainly like deserved blame. I think he, in his heart of hearts, knew what he was doing was not quite right. But the notion that this is the man who — he received initially a 14-year prison sentence.


ENRICH: And that …

RITHOLTZ: None of his supervisors, everybody else who is making the same page …

ENRICH: No one else.

RITHOLTZ: … or managing, nobody — forget going to prison, no one even really gotten into any trouble.

ENRICH: Yes. I mean, a few people lost their jobs. But as is often the case in the finance industry where institutional memories are very short, a lot of people got rehired and reentered the workforce and there have been — since then — so he was tried and convicted in 2015 and over the past five years, there has been a smattering of other traders who have been convicted and/or served some time in jail. And but none with sentences of anything like the magnitude of what Hayes got.

And I think since I wrote that book, the public perspective, essentially in the U.K., which is where a lot of these took place has really shifted toward initially viewing Hayes as this evil mastermind which is the case the government made about him to viewing him, at this point, largely as a escape goat who, while, yes, he did some things wrong, has become the single — the sole person who is paying a price for an entire institution, for an entire industries (inaudible) malfeasance which, obviously, is not fair.

RITHOLTZ: So, between the research and writing of the two books, between “Dark Towers” and the “Spider Network,” what surprised you that was parallel between these two areas of want and criminality and what just surprised you, in general, as you were doing your research?

Well, I mean, what surprised me most in the research process for both books was — and I’m not sure this is the answer you’re looking for, but I mean, it really — it was almost — it was just a fascinating journey for me getting to know these two people in these two books. So, on the one hand, Hayes, who is unlike any person I’ve ever met in my life and then Val Broeksmit, in the second book, who is also unlike anyone I’ve ever met in my life.

And those are certainly, I mean, without any question or competition, the longest running and most intense and stressful source relationships I’ve ever had. And in fact, they’re probably two of the most intense, stressful relationships I ever had, period

RITHOLTZ: Quite interesting.

ENRICH: And you learn a lot about yourself when you’re — when you’re spending years interacting with complicated people and trying to figure out how to relate to them and communicate effectively with them and trying to understand the world through their eyes.

I think — that’s one of the things I love most about journalism and this type of storytelling is that it expands — for me, really (ph), they kind of expanded my way of thinking about the range of emotions that people have. It’s really helped me, I think, be or learn a lot more about empathy. So, it’s been — from just a personal standpoint, really, fascinating and I think positive.

RITHOLTZ: Let me ask you a quick question here that is forward-looking, you’ve covered some of the malfeasance around the CARES Act, you wrote a story about hospitals getting bailouts, executives taking big bonuses and then laying off people even though they’re not supposed to, what you think the book about the CARES Act malfeasance is going to be five years from now?

Is — has some of the criminality around the government bailout risen to the same levels as LIBOR and Deutsche Bank or is this really just your run-of-the-mill malfeasance?

ENRICH: Well, I mean, the short answer is I don’t know. The longer answer is that based on what I’ve seen less at this point with the CARES Act, it’s less about malfeasance and/or the criminality and much more about sloppiness and what’s like a side helping of greed.

I mean, there’s the CARES Act, in general, was obviously rushed through congress and has been implemented in a really hasty way. I mean, like, which sounds bad. It’s — when you think about the context which is that Trump administration was understandably very desperate to get this money out into the economy as quickly as possible and I think there’s a …


ENRICH: … made that they were willing to take some heat for some recipients getting money that they really didn’t deserve. Some recipients using that money in appropriate ways for the sake of broadly getting trillions of dollars to the economy very quickly.

And so, I think the journalist and — I think the media played a very important role and accountability here in terms of writing about misuses of money or fraud and things like that. But I also think it’s important not to let those examples of wrongdoing or sloppiness or ineptitude corrode all faith in this program or really question the effectiveness or utility of this program overall because there — I mean, God, imagine the shape the economy would be in right now if those trillions of dollars were not being put into the economy.



RITHOLTZ: Don’t let the tail wag the dog, in other words.

ENRICH: Yes. But on the other hand, the story is not fully told. The reporting will become much clearer as time passes. And it’s entirely possibly there is some serious criminality and malfeasance on a broad way that we, or at least I, am not currently aware of. And if that’s the case, man, what a story, that will be.

RITHOLTZ: Yes. To say the least.

All right. Let’s jump to our speed round. These are our favorite questions we ask all our guests and this is the part of the conversation that we’re going to keep it fast and short.

And let’s start with what are you streaming these days? Give us your favorite Netflix, Amazon, shows or podcasts you’re listening to.

ENRICH: I listen to “The Daily” which is a “New York Times” podcast just about every day. I just listened to “Wind of Change” which is fantastic. Netflix, the best thing — the best show I’ve watched in a long time is “Ozark” which I love.

RITHOLTZ: Tell us about your mentors. Who helped guide your career in journalism?

ENRICH: Going back to college, I had a great professor, Jack Pitney who really thought me more than anyone else about writing well and keeping things in the active voice, not using adverbs, keeping sentences short and sweet.

In journalism, the — and I think the best mentor I’ve had is Bruce Orwall who’s a legendary reporter and editor at “The Wall Street Journal” who coached me through my relationship with Tom Hayes and to some extent, Val Broeksmit as well. And he’s now the global sports editor at The Journal and he’s just — he’s an extraordinary person and journalist and he’s been a mentor to dozens and dozens of really the journalist over the years.

RITHOLTZ: Fascinating. Tell us about some of your favorite books. What are you reading now and in what some of your all-time favorites?

ENRICH: I am, right now, reading “Straight Man” which is a novel and (inaudible). I cannot remember who it’s by. The — but it’s fantastic. It’s not new.

I recently read “Hidden Valley Road” which I think everyone’s probably reading which is also fantastic. But I think right now, my favorite all-time book is a little more obscure, it’s called “Or I’ll Dress You in Mourning.” Mourning as in like grieving, not morning as in the time of day.

RITHOLTZ: Mourning with a U.

ENRICH: It’s nonfiction — yes, mourning with a U. And it is written, I believe in the late ’60s by a pair of Journalists and it’s about bullfighting in Spain and it is lyrical and fascinating. It’s just a wonderful, wonderful book.

RITHOLTZ: And what sort of advice would you give to a recent college graduate who is thinking about a career in either journalism or longform investigative journalism?

ENRICH: I think the — I mean, there’s so much advice I could give. To me, the advice that I wish I had gotten when I was just starting is start — you won’t be as aggressive and fast moving and ambitious as you can be but make sure that you’re finding a place to start where — where you have a good editor and you have a good mentor and where — when you make mistakes and when you fail, you’re not going to do so in such a spectacular way that it jeopardizes your entire career. And if you will make mistakes and you will fail and you want to do that in kind of a contained phased environment.

RITHOLTZ: And then a related question, I guess, is what do you know about the world of journalism today that you wish you knew when you were first getting — starting out?

ENRICH: Yes. I mean, that — that everyone makes mistakes and that those mistakes can be really grave if they’re not done in a — you don’t want to be like start rock climbing without ropes. And it’s the same with journalism. Like, you need to respect what you don’t know and respect what you can learn from others.

And so, I think there’s a temptation — I know I certainly face this myself. Where you kind of just — you think you know everything when you’re 22 years old and you want to go off and just prove yourself and you think you can do it. And the reality is, maybe you can do it, but you will do it so much better and — in a much more productive way if you’re doing it with someone who’s going to make you better.

And so, that often means not just going for the gold and everything. You need to kind of check your ambitions a little bit and find an organization and individuals you can work with that will really — that you will learn a lot from.

RITHOLTZ: Thanks, David, for being so generous with your time.

If you enjoy this conversation, check out all our previous such interviews. We have over 300 recorded over the past six years. You can find them at iTunes, Spotify, Google Podcasts, Stitcher, Overcast, wherever finer podcasts are sold.

We love your comments, feedback, and suggestions. Write to us at You can check out my weekly column on Sign up for my daily reads at Be sure and give the show a review at Apple iTunes. You can follow me on Twitter @ritholtz.

I would be remiss if I did not thank the crack staff that helps us put these conversations together each week. Tim Harrow (ph) is my audio engineer, Michael Boyle is my producer, Atika Valbrun is our project manager, Michael Batnick is our head of research. I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.


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