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As IMF Said, Deutsche Bank ‘Exports the Most Risk’ to Bank System

Aug. 19, 2016 (EIRNS)—Financial press headlines today report the op-ed in the Financial Times by Deutsche Bank whistleblower Erik ben-Artzi, stating why he is refusing an $8.25 million award for reporting the bank’s manipulating the value of its derivatives book in late 2008. The award is ben-Artzi’s share of a $55 million slap on the wrist paid by Deutsche Bank to the SEC, for criminally fraudulent statements to regulators about the risk of $130 billion in derivatives exposure. Ben-Artzi refuses the award precisely because there was no criminal prosecution and the SEC and Deutsche Bank were literally exchanging personnel through a revolving, in fact wide open door. Suffice to say that Deutsche Bank’s general counsel in 2009-10 became the SEC’s Director of Enforcement in 2012, and stood to suffer significant financial losses if the bank were prosecuted.

It is also important to the present case of Deutsche Bank, that it fraudulently disguised a loss in just this $130 billion part of its derivatives assets, of $10-12 billion, enough to have plunged its capital to a level requiring nationalization. This is reported by today. If it misreported its derivatives assets then to cover losses and potential insolvency, and suffered essentially no regulatory consequences, it is likely doing the same again now.

In 2014, Deutsche Bank sold a significant chunk of its derivatives exposure—with its energy and metals trading division—to a greater fool. The greater fool was Citibank, which is now essentially equal with Deutsche Bank and JPMorgan Chase as the banks with the biggest derivatives exposures in the world.

Moreover, the Financial Times reported Aug. 18 that the U.S. CFTC has charged Deutsche Bank with repeatedly failing to report its swaps derivatives—primarily interest-rate swaps—for various "reasons." CFTC fined Deutsche in September 2015; has charged it again; and says it is still failing to report, "compromising the CFTC’s ability to gauge systemic risk throughout swaps markets."

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