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By Ben Harar (2010)
On September 2, 2004, the German news magazine Der Spiegel reported that the Deutsche Bank is considering investing 1 billion US dollars into bad credits in China. According to Der Spiegel, the figure was mentioned towards the South China Morning Post by James Li, vice president for strategic investments of the Deutsche Bank in China.
As reported by Der Spiegel, the Deutsche Bank had already previously participated in the purchase of assets during compulsory auctions in China.
I am not a banker, and I don’t know whether buying bad credits in China is good business, financially. But what I know is this: where there are bad credits and bankrupt businesses, there also is the destruction of people’s dreams, and of their livelihood… and I’m not talking about managers, but ordinary folks.
Usually, only people who are willing to be exceptionally harsh will make a profit from taking over bad credits or bankrupt businesses. Often, what they calculate is the value of scrap. Fire all staff, then sell the tangible assets one by one… and for equipment that otherwise does not find a buyer, there is still the junkyard that pays per kilogram. While some shareholders may walk away with a profit, the human toll often is not taken into consideration, nor is the fact that through such procedures, you get rid of a community’s tools of productivity.
I am German, and I am sometimes in China. I doubt that it helps our reputation that the largest German bank (still the largest, and they still are German) is profiling itself through buying bankrupt businesses and bad credits. I don’t feel that it is befitting the reputation of the bank and the country. Emotionally, it’s on a level with credit sharks, debt collection agencies, land expropriators, and other businesses for which you need armored Mercedes cars.
But it’s not that the Deutsche Bank, or their bosses, would be involved in such practices only in China. In Germany, the Deutsche Bank CEO Josef Ackermann played an important role in the hostile takeover of the Mannesmann-Konzern (a large, economically healthy communications company) by Vodafone for the price of 180 billion Euro. Vodafone then liquidated Mannesmann. For that transaction, the Deutsche Bank, because of its CEO, received more attention than they wished for, as it was revealed that tens of millions of Euro were paid out as bonuses to previous Mannesmann executives. For this, Deutsche Bank boss Josef Ackermann, ex-metal union boss Klaus Zwickel, the former Mannesmann CEO Klaus Esser, and the former chairman of the board of directors of Mannesmann, Joachim Funk, all were indicted for corruption in September 2003, but after a lengthy trial were acquitted in July 2004 as the payments didn’t violate penal statutes.
During the trial, Ackermann made a famous statement that was perceived to reveal the arrogance with which bankers and top managers view the human suffering often caused by their profit-oriented decisions. He said: "Das ist das einzige Land, wo diejenigen, die erfolgreich sind und Werte schaffen, deswegen vor Gericht stehen." English translation: This is the only country where those who are successful and generate values [assets] have to defend themselves in court.
Yes, some shareholders made a profit from the Mannesmann sellout (which is not uncommon in hostile takeovers). But Mannesmann was a healthy company, and even a serious competitor of Vodafone. Thousands of people were put out of work because of the sellout. For the ordinary folks, and the community of Düsseldorf, the Mannesmann sellout did not generate value. It destroyed livelihood.
But Josef Ackermann was not the first Deutsche Bank CEO who made cynical comments when small folks became the victims of executive gambles or failures. One of his predecessor, Hilmar Kopper, is remembered for belittling as "peanuts" the losses of some 50 million Deutsche Mark, suffered by craftsmen when the German building tycoon Jürgen Schneider went bankrupt in 1994.
Germany, China… what will be the next stop. How about tsunami-ravaged Aceh and North Sumatra. Many bankrupt businesses there, as assets and employees, and a good number of owners, have been washed into the sea and vanished. I am sure, there are plenty of bargains to be had, once the immediate relief operations have ended.
Actually, through a subsidiary company, Pago (owned 50 % by the Deutsche Bank), they are already negatively affecting business in Aceh and North Sumatra. Pago terminated third-party processing of PaySystems, a company that cleared credit card payments for export products from Aceh and North Sumatra. Because of Pago and the Deutsche Bank, PaySystems stopped all remittances to the Indonesian company (PaySystems account 189020), in spite of the fact that this company had an impeccable credit card fulfillment record. You can see more information on this particular case at: http://www.tongkatali.org/tsunami-deutschebank.htm
(Partner of the Deutsche Bank at Pago is Otto Beisheim, a wealthy businessman who actually likes to project a philanthropic image in Germany and other countries of Europe.)
I have contacted Pago in this matter, but from their press office, I only received the information that they have an NDA, a non-disclosure agreement, regarding their involvement with PaySystems.
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Copyright Ben Harar