German Banking Crisis

Discussion in 'Politics' started by MondoTrader, Feb 27, 2003.

  1. "He should dump it in Chancellor Schröder’s lap for the German banking problem is political. The Government has been propping up banks for years, guaranteeing the loans of the Landesbanks, the state-controlled regional lenders. Vast property loan portfolios were transferred to Landesbanks for a song and, flush with funds, they borrowed and lent cheaply, undermining the private banks. Under pressure from the European Commission, Berlin finally agreed to end the subsidies, but too late to prevent damage.

    It all rings a bell. In the 1990s hundreds of American real estate lenders known as Savings and Loans went bust after a reckless lending spree guaranteed by state deposit insurance. The Government bailed them out at a cost of $34 billion, creating a dustbin loan company, the Resolution Trust. Germany is not there yet, but it has been sowing the seeds."