Earlier this week the German giant announced that 18,000 people would lose their jobs at the bank over the next three years. Economics author Ian Winer made a grave prediction of a potential upcoming “nightmare scenario” on RT America. He told host Rick Sanchez: “I think if the bank were allowed to fail it would be a catastrophic event for the global banking system.”
But he added: “I think it’s next to zero probability that that happens.”
Incredulous, Mr Sanchez asked: “Really?”
Mr Winer continued: “I do because I think if it were to get to that point the Germans would take over the bank the same way we took over many of our financial institutions when they were on the brink.
“Because it’s just too big a deal.
“There’s too many assets and too many different counter-party situations where one bank is trading with another that if Deutsche bank were to just evaporate like Lehman Brothers did it’s hard to describe what that would do to the global financial system.
“Especially because Deutsche Bank is much bigger than Lehman Brothers was.”
But Mr Sanchez was horrified: “If you’re right by bailing them out they’re rewarding them aren’t they?”
His guest replied: “I’m not a fan of the bailout but I think what they’re saying is if we don’t do this the collateral damage to the individual, not just in Germany but around the world, could be so devastating that it’s worth the perception that they’re too big to fail or the leadership that got them to this position is getting bailed out.”
Mr Winer concluded: “If Deutsche Bank goes under in the next month the nightmare scenario is that however many trillions of dollars worth of derivative contracts they have with other banks evaporate and the global financial system craters as a result.”
Professor Richard Wolff, one of America’s most prominent economists, has further claimed that if Deutsche was in trouble it was likely far from alone. He explained to Mr Sanchez: “It would be easy to find statements by experts, by bank CEOs, by Wall Street commentators telling us not to worry – it’s a detail, it only affects one bank.
“None of that is normally true.
“Deutsche Bank is the biggest bank in Germany.
“It is one of the biggest banks in Europe and the world.
“If it has serious troubles those troubles are also affecting other banks and they’re affecting the interactions between a monster bank like Deutsche and all the other banks since these banks do an enormous amount of business with one another.
“The truth is the people who run these banks hide their difficulties from the shareholders, because they want to keep their jobs and from their workers because they don’t want to freak people out – that their jobs might be in danger.
“So what we’re left with is very little, lots of PR and a big question mark.
“Because clearly that bank is in serious trouble.
“But we won’t know the extent of it until they’re good and ready or until something blows and then the whole game is up.”