fi412_extracredit_db_rwd_6.10.16

fi412_extracredit_db_rwd_6.10.16 - Rachel Dodson 6 October...

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Rachel Dodson 6 October 2016 “Deutsche Bank offers a tough lesson in risk” In his article “Deutsche Bank offers a tough lesson in risk”, Martin Wolf argues that there are multiple lessons associated with the situation surrounding Deutsche Bank. Deutsche Bank is facing financial problems currently due to a demand by the Department of Justice to settle for $14 billion regarding a discrepancy in selling mortgage backed securities in the United States. Banks are highly leveraged that run off of ultra-liquid liabilities and illiquid assets, giving them the appearance of being impenetrable. The problem with the attempt of fining Deutsche Bank $14 billion dollars is that a majority of this penalty will fall to the shareholders as opposed to the management responsible for the problem. Germany holds that a bail out is impossible, but the size of banks rules out the possibility of many other options. This points to the possibility of using a temporary bail-in from private creditors.
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