It is difficult indeed not to yield to the temptation to draw an analogy between the allegory of the ring and the unbridled financial system of the 21st century and even harder to do so when the former possesses the same two main attributes. As a formidable magnetic field attracting both wealth and the best graduates from top universities, finance exerts an undeniable force of attraction. Yet at the same it also constitutes a strong destructive force, as the financial crisis will attest to. But to perfect our comparison between J.R.R. Tolkien’s ring and ‘casino finance’, we also need to find our Gollum, capable of embodying the role of the ring’s devoted servant.
Addicted to Speculation
There is no need to search too far while Deutsche Bank, active in Belgium since the early 90s, seems predestined for the role. Just as Gollum obsessively worships his precious ring, the German banking monster is passDeutsionately devoted to the cult of ‘casino finance’. And sometimes, to extremes: between 2007 and 2012, Deutsche Bank didn’t hesitate to get rich betting on early deaths! Two studies from the Centre for European Policy Studies (CEPS) rank Deutsche Bank (in the company of BNP Paribas, Société Générale, HSBC, Barclays, Nordea, RBS and WestLB) among the most speculative of European banks. What is clearly apparent from the analysis of its balance sheets is the proportion of loans to individuals and to businesses represents a scant 17% of its assets. The rest is devoted to its market activities (buying and selling short-term financial products).
However, our analogy does not stop at the simple evocation of an obsessive adoration. If the power of the ring pushes Gollum to commit crimes, that of unbridled finance incites Deutsche Bank to other transgressions. A number? The premier German bank possesses 657 subsidiaries located in tax havens (outside of the European Union). Its strong presence in these secret jurisdictions allows it to fix its books, to circumvent the rules of fiscal prudence and to avoid paying tax. The avalanche of legal proceedings currently involving Deutsche Bank is the most scathing proof.
On the 12th of December last, a German court raided the offices of the bank in Frankfurt, under investigation on suspicion of massive tax evasion through the exchange of carbon dioxide (CO2) emission permits. Its co-president, Jürgen Fitschen, is directly implicated in this scandal. A few days previously, the British financial daily the Financial Times had revealed that three ex-Deutsche Bank employees had filed a complaint with the American financial authorities accusing the bank of concealing more than $12 billion USD (9.2 billion euros) of unrealised losses during the financial crisis. More precisely, they have accused the bank of deliberately undervaluing a derivative product known as ‘leveraged super senior trades’. This is not the only judicial inquiry that Deutsche Bank is facing in the United States. The noted German investigative magazine Der Spiegel recently highlighted that the bank is currently the subject of litigation in the US for abusive expropriations as well as for fraudulent advice. The reputation of Deutsche Bank is so tarnished in Uncle Sam’s country that it could soon be known as the Goldman Sachs of Frankfurt. Finally, the bank is currently the subject of investigation by the German supervisory authority for its involvement in the Libor interest rate-rigging scandal (London Interbank Offered Rate).
Tolkien’s Gollum and Deutsche Bank share a final point in common: their quest for absolute power – be it magic or financial – consumes them both progressively. Greed has pushed the German bank to take more and more risks: to the extent of endangering its very own existence. It should be remembered barring the $11.8 billion dollars obtained from the American authorities through the rescue of AIG in 2008, Deutsche Bank would also share Gollum’s undead traits!
My Precious, Precious (Belgian) Saviour/Saver
But why share this diatribe against the premier German bank with you today? Because the release of the film the Hobbit coincided with the launch of an intensive publicity campaign from Deutsche Bank in Belgium. Its objective is clear: to capture as much treasure in the form of the excess savings of Belgian citizens. This is a very cheap source of financing that the bank means to use to finance essentially speculative ends. Adopting the slogan ‘advice should pay’, Deutsche Bank has shown rare cynicism even for saving consultants: it is of course the bank that will profit from their advice. Like the hobbit, I would strongly advise you to resist the lure of Gollum in modern times.