European Banks Are ‘On the Brink’; Some May Be Over It
July 8, 2016 (EIRNS)—In the latest desperation "idea" for saving the failing European banking systems, Bloomberg News today floated mergers of the biggest European banks into even bigger monsters—Deutsche Bank merging with Barclays, Santander merging with Deutsche Bank, JPMorgan Chase, or Société Générale buying Standard Chartered, etc. None of these "ideas" can save a trans-Atlantic money system so intrinsically rotten and "dead," noted EIR Founding Editor Lyndon LaRouche, that
"it has no possible path to recovery—and the London banking system is the worst. You must cancel it and start from scratch with a new financial system."
Germany’s financial newspaper Handelsblatt ran a headline article July 8, "Banks on Brink as Contagion Fears Grow." The authors meant the 50 largest European banks. "A study by the consultancy ZEB," the paper wrote, "made exclusively available to Handelsblatt, shows the problems that Europe’s banks are facing. In their report, the consultants describe the profitability of the 50 biggest European banks as, "on average, catastrophic." The return on equity of large banks in the euro zone was actually ... well below the cost of capital."
The essential case presented is that these banks must have more capital to survive because of their years-long, increasingly drastic loss of market capitalization and their bad assets; but they are unable to raise capital for the same reasons. Thus, they must get that new capital from new government bailouts, or fail.
The financial blog Seeking Alpha wrote June 8 that the three banks with the most immediate risk and biggest global exposure are: Deutsche Bank, Credit Suisse, and UniCredit, and all three have seen their share price collapse to a few dollars, or even pennies, over the past year. But it is Deutsche Bank, with its immense derivatives exposures, that "would be the most serious of the three," according to the IMF, which stated that the bank "poses the greatest systemic risk to the global financial system."
LaRouche commented that this is "well worth noting" and that Deutsche Bank is "monstrous." But he noted again that a new credit and money system is the only way to avoid economic death in Europe, the United Kingdom, and Obama’s United States; and that that means "looking at the question of economy as Einstein looked at it." Einstein, of course, was a supporter of President Franklin Roosevelt.