Deutsche Bank’s Rise, Stumble and Trump

Of all the giant investment banks to survive the financial crisis, the one with the greatest lingering issues may be Deutsche Bank. That is according to this week’s guest on Masters in Business, David Enrich, finance editor at the New York Times, whose 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 markets into a global juggernaut. It was an early proponent of using derivatives both as hedge for client positions, and then later as a profit engine.

Deutsche Bank’s rise and stumble began with the $10 billion purchase of Banker’s Trust in the 1990s. Enrich explains how a great migration of traders from firms like Merrill Lynch and UBS to Deutsche completely changed the nature of the bank’s revenue, 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 stay on top of the rapid growth in assets and risk. The technology of the bank was a patchwork of incompatible computer systems unable to track all of the bank’s financial positions.

Enrich describes how Deutsche Bank became the lender of last resort to Donald Trump in the 2000s. After Trump defaulted on a loan for a Chicago skyscraper, he was cut off from the bank’s commercial lending divisions, but he managed to become a client of its private banking division. Trump’s election as president led to a whole new level of complications for the bank.

A list of Enrich’s favorite books is here; a transcript of our conversation is here.
You can stream and download our full conversation, including the podcast extras on iTunesSpotifyOvercastGoogleBloomberg 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-chief investment officer at Harding Loevner, which manages about $70 billion. Hallett also is the owner of Plymouth Argyle Football Club, a League One team based in Plymouth, England.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”

©2020 Bloomberg L.P.

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