The financial crisis system

Politically planned redistribution at the expense of the middle class

Ten billion of taxpayers’ money for IKB, 18.2 billion for Commerzbank, soon 150 billion for Hypo Real Estate (HRE), etc. Hundreds of billions to pay off betting debts and ongoing bonuses for investment bankers. Whose money is being distributed? That’s right: the citizens’ money.

Safer than Liechtenstein

Every time a bank makes a restructuring loan to an ailing company, there are tough conditions: cutting salaries, frugality in personal spending, cancellation of profit distributions, abandonment of loss-making casino business models. In the case of financial houses, this is precisely what is not happening. The citizens’ money is thrown out the window with both hands, and the casino goes on. The state-controlled banks are also in on the act: as a model, their foreign subsidiaries are helping clients evade taxes right up to the recent present. Black money seems to be safer there than in Liechtenstein.

The fairy tale of surprise

Distrust is the order of the day, as politicians unceremoniously invented the fairy tale of a surprise financial crisis from the USA since 2008. But already on February 24, 2003, the “Handelsblatt” reported that the German government had sat down with the heads of the banks and insurance companies to look for a solution to the billions of bad risks that our honorable banks and insurance companies had already accumulated at that time. And the financial houses had known since 1999 from the “New York Times” that various U.S. banks, under political pressure, had begun to make home loans to buyers with no credit rating. The gambling casino for financial houses only works with the blessing of politics, and of course only if the taxpayers are allowed to pay for the losses in the end.

Plundering of German companies fiscally encouraged

“Bad bank” comes from “bad banking”: a central responsibility for this lies with the Federal Ministry of Finance, because it actively participated in the development and introduction of the junk securities. Packaging bad debt into better sounding securities has been made easier. Hedge funds were licensed in Germany in 2004. The plundering of German companies by German and foreign so-called investors, or more precisely “locusts”, received tax incentives from 1 January 2002. To this day, these regulations remain virtually unchanged; an excellent basis for the fact that the next financial crisis seems as certain as the Amen in the church.

Bank gifts at the expense of the taxpayer

Political leaders pretend to be careful with our money. The Finance Minister moves to rescue HRE with state money exactly one day after the liability of the former owner HypoVereinsbank expired on 28 September 2008. In effect, a gift to this bank, at taxpayer expense, unfortunately, with nothing in return to the minister? Politics has made the sell-out of the “financial centre Germany” possible in the first place: locusts achieve high returns by taking over a company with a minimal share of approx. 20 percent equity, taking on debts with high interest rates at the expense of the company and additionally burdening it with consulting contracts. So in variations at Grohe, Märklin, Hugo Boss, Altana alias Nycomed and many other companies. The resulting unemployed must then again be fed by the taxpayer.

“Show trials!”

Asked recently what is called for now, ex-hedge fund manager Jim Cremer said, “Show trials!” Indeed, those responsible belong in the pillory. Politicians, on the other hand, tell us that we need more transparency and more regulation – the legal reality is the opposite. Even the government’s aid packages did not change this: the casino was not closed. Hundreds of thousands of investors were deprived of their money through complex financial products (e.g. derivatives and certificates). Those responsible, including Josef Ackermann, will not be held accountable.

SMEs: Drop the “bad banks”!

SMEs should seek business links with financial institutions that are healthy, with the usual five to eight percent return on equity – and that have “members”, such as cooperatives and insurance associations. No one is forced to promote casino institutions through their own business connection. Even long-term and non-cancellable contracts can be terminated without notice if the financial institution is in a worse economic position, for example due to stock market bets. We don’t have a liquidity crisis, we have a credit crisis: the bankers’ rule has always been, “If you have money, you get credit.” Debt reduction has become more important: Value-creating companies in the middle-market real economy can then more easily switch to solid financial houses. However, as long as the middle class does not drop the “bad banks”, politicians will continue to find reasons to sponsor “bad banking” with citizens’ money.

by Dr. Johannes Fiala and Albrecht Müller

by courtesy of

www.pt-magazin.de (published in P.T. Magazine, issue 03.2009, pages 36-37)

and

www.hm-infinity.de (published in Halstenbeker Magazin, issue 04/2009, pages 16-17)

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About the author

Dr. Johannes Fiala
PhD, MBA, MM

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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