German finance: The sick banking system of Europe

The financial crisis provides a chance to fix Germany’s state banks PERSONAL greed is often the explanation given for the disastrous forays of the world’s banks into America’s subprime mortgages. In Germany, however, many of the worst decisions were made not by the bonus-driven crowd in Frankfurt but by ostensibly well-intentioned public servants in the country’s public banks, or Landesbanken. The extent of the damage wrought on the Landesbanken, most of which are owned by state governments and local savings banks, was revealed late last month in a leaked document that was published by the Suddeutsche Zeitung, a newspaper. It said that the financial regulator, BaFin, reckoned that German banks—mostly Landesbanken—held €816 billion ($1.1 trillion) in toxic securities. On May 6th five Landesbanken had their ratings cut by Standard & Poor’s. ... (link)