Japanese Economist: How To Deal with the Collapse of Deutsche Bank and the Western Banking System
Sept. 28, 2016 (EIRNS)—A prominent Japanese economist with experience in dealing with severe crises in the banking system, presented a plan to EIR on the necessary steps to deal with the onrushing collapse of Deutsche Bank and the huge contagion that collapse will bring to the rest of the advanced sector financial system. The plan is coherent with the proposal made by Lyndon LaRouche in July for a government intervention to keep the bank afloat as a necessary institution for the German economy, but to return to the competent banking policies of former Deutsche Bank CEO Alfred Herrhausen, who was assassinated in 1989.
First, the economist said, there is no option other than nationalization. Neither bailout nor bail-in can overcome the massive derivative bubble and other liabilities of the Bank.
To accomplish this, a date must be set upon which all derivatives must be settled. Those that can not be settled are declared void.
A Glass-Steagall-type policy must be imposed on Deutsche Bank, completely separating its commercial banking activities from its investment banking activities.
In preparation for these moves, the entire western banking system must be put on notice that the impact on the counter-parties of the massive derivative holdings of the Bank which will be declared void—mostly other U.S. and European banks —will be profound, while the contagion impact on the markets will also be dramatic. Therefore all the major banks, and the governments involved, must prepare to implement similar policies upon those banks which are threatened with failure.
Finally, those responsible for the destruction of Deutsche Bank must go to jail for their crimes. This is necessary to convince the population that the policy is serious, among other reasons.
The economist noted that the implementation of Glass- Steagall by all the governments involved, before the crisis explodes, would dramatically lessen the danger of a panic and/or uncontrolled breakdown of the banking system, allowing an orderly reorganization of the entire banking system.