Billions From Deutsche Bank Despite Trump’s Bankruptcies, Defaults, and Financial Malfeasance

March 20, 2019

The latest developments about Trump's relationship to Deutsche Bank could be the unraveling with Deutsche Bank and Trump facing a serious legal probe on bank fraud by the House Financial Services Committee chaired by Rep. Maxine Waters

The latest developments about Trump's relationship to Deutsche Bank could be the unraveling with Deutsche Bank and Trump facing a serious legal probe on bank fraud by the House Financial Services Committee chaired by Rep. Maxine Waters


Billions From Deutsche Bank: Despite Trump’s Bankruptcies, Defaults, and Financial Malfeasance

Story Transcript

MARC STEINER: Welcome to The Real News Network. I’m Marc Steiner. Great to have you all with us.

Now, would you loan money to someone who had sued you or who had a reputation for welching on their loans, or someone who never repaid what they borrowed and was really a risk to do business with? You’d think twice, wouldn’t you? Supposing someone lied about how much money they were worth in order to get you to do business with them, to convince you even to loan them some more money because they were good for it, or do business of any kind.

Well, that’s what on a larger scale seemed to happen, at least we think happened, between now President Donald Trump and the 16th largest bank in the world, Deutsche Bank. Trump’s reputation as a businessman made it almost impossible for him to get a loan from any bank around, but not Deutsche Bank, that quoted very wealthy people and even Russian mobsters. And Congress is opening investigations now about all this.

Joining us today to dissect this complexity is the always humorous and insightful Bill Black, Associate Professor of Economics and Law at the University of Missouri Kansas City, a white collar criminologist and former financial regulator, author of the book, The Best Way to Rob a Bank Is to Own One, which is pretty good for this program we’re going to do today. And Bill, welcome. Good to have you with us.

BILL BLACK: Thank you. Good to be back.

MARC STEINER: So before we jump into it some of these clips I want people to see, we can talk a bit about, this story that’s breaking now, I mean, the whole idea that Donald Trump kind of could skew who he really was, lied about how much money he had, all the things he allegedly had and didn’t have, and actually was given money by this bank. How unusual is that?

BILL BLACK: It’s not very unusual. Indeed, what I write about the most is something called control fraud, and that’s when the people that control a seemingly legitimate entity, like a bank, actually use it as a weapon to defraud. So when we say seemingly legitimate, we of course mean actually not legitimate, actually criminal enterprise. And Deutsche Bank probably takes the prize. It’s quite a competition for the absolute worst huge bank in the world. So it shows up everywhere, all the time, recurrently committing massive felonies.

MARC STEINER: So are you saying this is a common banking practice beyond this whole thing with Deutsche Bank we’re about to leap into?

BILL BLACK: Oh, absolutely. So in the savings and loan debacle, there were 300 of these control frauds. And we put almost all of their leadership in prison in the Enron era. All of those major ones were control frauds. Enron was a criminal enterprise, it just posed as an energy company, but it was really a criminal enterprise. It is a form of organized crime, in course. In the Great Financial Crisis, the run up, all of the lenders that specialized in making liars loans–as the name implies, those are knowingly fraudulent loans made by the lender. So all of those were frauds and the major entities that purchased them were also engaged in fraud, which is why it was a “don’t ask don’t tell” system where everybody pretended that the loans had high quality.

And of course, the epitome of this hilarious party was calling these things which were absolute toxic waste AAA, which is the best possible credit rating in the world. So yes, Deutsche Bank is far from alone in this. It’s simply the worst surviving enormous fraud in the world of finance.

MARC STEINER: So one of the things–let’s jump into this clip we have. This is a clip that we have from David Enrich, who wrote the article The New York Times, it appeared in this morning’s paper, A Mar-a-Lago Weekend and an Act of God: Trump’s History With Deutsche Bank. But this is what he had to say on television about his piece.

DAVID ENRICH: Deutsche Bank has become synonymous, I think in the United States right now, with money laundering for Russians and lending to Donald Trump.

SPEAKER: So after President Trump won, how did Deutsche Bank handle all this?

DAVID ENRICH: Panic. And the first thing they did it was assess a number of reports into how on earth they got into this mess. Because it turned out people at the board level, and even some of the very senior executives, hadn’t even realized until pretty recently that Trump was a major client. They were just completely clueless, completely in the dark.

MARC STEINER: So Bill, I mean, what shocked me at the end of what he said was that the upper echelons of the bank had no idea this was going on. Yet there were some contradictory things that in the article that he wrote. So I mean, what to you is reality here?

BILL BLACK: Well, this is, of course, Casa Blanca. “Shocked, shocked, I can’t believe what’s going on at this institution.” Here’s the really short version. Donald Trump is a crook. Donald Trump runs a criminal enterprise before he becomes president. Virtually everything that it does involves fraud that’s been made public. And all of the subsidiary things, like his college which wasn’t really a college, was just an out and out consumer fraud as well. OK. So you can get away with this for a very long time. And Trump got away with this for decades, where he stiffed one U.S. bank after another. But eventually, eventually, they say, “No, hell no, we ain’t going to loan you any more money.”

And so, Donald Trump literally could not borrow from any major U.S. bank, so he went to an international bank known for its sleaziness, and that’s Deutsche Bank. And Deutsche Bank, contrary to what you’ve just heard, loved Donald Trump. Now, it loved Donald Trump not because it would actually be good for the bank, but it would be good for the bankers.

MARC STEINER: What does that mean?

BILL BLACK: That means that your salary depends on how many loans you make at what interest rates and such. And so, Donald Trump, you could make large amounts of loans. Now, those loans are going to default eventually, but the bank doesn’t recapture, we call it clawback, the bonuses it paid to you. So as an officer, you’re making a ton of money. And this wasn’t one division of Deutsche Bank, this was three different divisions of Deutsche Bank that Trump ripped off. So one was the commercial real estate, another was the investment banking outfit, and the third is private banking, which is a euphemism for handling the money of the super-duper wealthy type. And the greatest act of chutzpah is he actually went to one of these units and said, “Give me a loan and I’ll use it to pay off my debts to your other unit.”.

MARC STEINER: I read that.

BILL BLACK: Well, that’s important. Because remember, I was a banking regulator. Banking regulators look at loans in default and they get really upset at them. And so, Deutsche Bank had all these loans in default. And as you said, it had Donald Trump suing them because they gave him money. That’s kind of hard to do, right. Deutsche Bank gives me money, I don’t repay Deutsche Bank, and I sue Deutsche Bank.

MARC STEINER: I still get more money.

BILL BLACK: Right. This was just an utter outrage. It would have gone to the senior management of Deutsche Bank on many different occasions. And they knew enough, as soon as Trump got to be a really serious candidate, to say order across all of Deutsche Bank, and Deutsche Bank is a massive institution, no one is to mention the word Trump and such. So yeah, they not only knew, they had plans within plans to try to stop this. But Deutsche Bank is so badly run that it actually cripples international banking regulation. So what I mean is Germany–

MARC STEINER: Did you say cripples?

BILL BLACK: It cripples international banking regulation, just this one institution. Here’s how the politics work. Germany, of course, absolutely dominates the EU. Germany’s biggest bank by far is Deutsche Bank. And by the way, while we’re talking, this pathetic criminal enterprise that is always in huge economic trouble is about to be approved by the German government to acquire another very large German bank and make it even bigger.

MARC STEINER: But isn’t that one of the reasons they’re so worried about this investigation taking place now?

BILL BLACK: That is why. So Deutsche Bank wants to acquire Commerzbank as we speak and such. Now, that’s the last thing in the world a banking regulator should allow, is a sick criminal enterprise to get even bigger. But it will, very high probability, be approved and come about quite soon.

OK, so track this. Deutsche Bank’s already too big to fail. And Deutsche Bank already doesn’t have enough capital to meet its current, weaker capital requirements. And so, these reform efforts in the EU to raise capital requirements, which is desperately needed in Europe, have been greatly delayed by Germany insisting, “No, no, no, we’re going to do that really, really slow and weak, because otherwise, Deutsche Bank will need multibillion dollars of infusion of extra capital, and we have no idea where it would be able to get that money, and if it did, it would probably come from Putin.”

MARC STEINER: What do you mean? Because of alleged relations with Russian mobsters, is that what you mean?

BILL BLACK: Yeah. I mean, the folks who actually provide capital have tended to be associate kleptocrats and the worst of the Middle Eastern states where they have their investment funds put money in to these massive banks. So this is not good on multi dimensions for the world. But what it’s meant, as I said, is because of Germany’s political power and because Deutsche Bank is so weak, it has frustrated efforts across all of Europe to increase capital. And now, again, even as we speak, the Trump administration, by the way with the aid of chosen by Democrats, which is to say Schumer, is voting to cut capital requirements for even huge banks. Now, they desperately need higher capital requirements and they’re doing exactly the opposite.

MARC STEINER: I want to come back to what you just said here, but I want to play this next clip here. This is Maxine Waters and what she had to say about the coming hearings and what they’re looking for. One of the most stunning paragraphs that sums up for me that was in the New York Times was this. Let me read it to you. It said, “In nearly two decades, Deutsche Bank’s leaders repeatedly saw red flags surrounding Mr. Trump. There was a disastrous bond sale, a promised loan that relied on a banker’s forged signature [nobody has taking credit for it yet], wild exaggerations of Mr. Trump’s wealth, even a claim of an act of God,” which is why he didn’t want to have to pay his loan back. It is pretty amazing how this got maneuvered. But let’s listen to this in the context of what Maxine Waters has to say about where they’re taking this.

MAXINE WATERS: We started sending letters to Deutsche Bank last year. And they were not responsive because they didn’t feel that we had the authority to demand anything from them, the documents that we wanted. But now that I’m chairing that committee and the Democrats are in charge of the House, they have said they will cooperate. We have people that are going up to New York to sit with these people and to go over our document requests. And we’re going to find out a lot about Deutsche Bank and that bank’s relationship to the president. We are very concerned about money laundering. We know that Deutsche Bank has had a reputation for money laundering for a long time, and it’s the only bank that would really deal with the president. The other banks said “hands off,” they had enough of him, his bankruptcies, his suing, even Deutsche Bank.

MARC STEINER: So Bill, what do you think the upshot of this will be?

BILL BLACK: So oversight, that’s what she’s talking about, is exactly what was needed. Again, I was a regulator, I’ve testified I think 13 times in front of congressional committees. It is not a pretty process and it is a painful process. It’s not fair, it’s partisan often, but it’s absolutely critical to a democracy functioning. And it is literally true that the Republicans, in the first two years of the Trump administration when they had control the House, and of course at all times with control of the Senate, has simply refused to do oversight hearings. So this is a very good thing.

Now, to Deutsche Bank, what she’s saying is correct and the article is saying is correct. Deutsche Bank knew, and it knew not just one or two times but at least a half dozen times, that Trump Enterprises were lying. And instead of stopping the lies, Deutsche Bank frequently facilitated the lies, even when third parties were going to suffer the losses. And as I said, this has created what we saw before the great financial crisis. There it was between the United States and the city of London, the two great financial centers in a race to the bottom on financial regulation, to attract banks to locate there, whichever one had the weakest regulation. And there, the city of London barely beat out Wall Street, which is why you see such a disproportionate number of the scandals occurring in the city of London.

But now we have this competition between the United States and the EU, and perhaps soon with the United Kingdom as well, where you see a constant ratcheting down of effective supervision. And so, it is critical that Waters hold dynamic, very successful oversight hearings to block not just this particular scandal involving Trump, but the vastly more dangerous scandal of what’s happening to banking regulation.

MARC STEINER: So this is one last question about that. So we watched what happened when we had this gigantic financial disaster when Obama became president of the United States, which was an opportunity for them to put in new financial regulations, and that did not happen. So what needs to be put in place to prevent this? What has to be put in place to oversee the banks to ensure these things cannot happen? Is that possible?

BILL BLACK: It is possible, but it’s certainly not possible under Trump. So it isn’t so much the rules, it’s the people that enforce the rules. And Trump is not simply a fraud and a corrupt fraud, he is running a government of crooks. His cabinet level, his sub-cabinet levels and such, these are disproportionate… Look, the easiest prediction I ever made as a criminologist was that the Trump administration will be the most corrupt administration in the history of the United States. So we can put all the rules in place, but as long as Trump puts these. Clowns and thieves in charge, they are not going to enforce the rules. So again, they simply have to be defeated at the polls.

MARC STEINER: Well, on that note, I want to thank you so much, once again, Bill Black. It’s always a pleasure to talk with you. We always learn so much, it’s a very insightful conversation. Thanks for your time.

BILL BLACK: Thank you.

MARC STEINER: And I’m Marc Steiner here for The Real News Network. Thanks for your time and for joining us. Take care.