Thursday, November 8, 2007

Head of Deutsche Bank Says This is the Worst Crisis in 30 Years

Interesting comments about the current financial crisis from the head of Deutsche Bank in an article in Yahoo. My wife and I were discussing the current “goings-on” and we admitted that it was probably the worst financial crisis we will see in our lifetime. I can remember back to the worst stock market crash since the Great Depression, which is the crash in the early 1970s. Text in bold is my emphasis.

Global credit markets are deep in the worst crisis of Deutsche Bank chief Josef Ackermann's 30-year career, but he does not see any further writedowns for Germany's flagship bank.

"If you go back to the Asian crisis, the Latin American crisis, the Russian crisis, these were pretty regional," said Ackermann, who also heads global banking organization the Institute of International Finance.

"(This) is psychologically the worst crisis that I have seen in my 30 years," he told journalists at the Reuters Finance Summit.

"What is really new and unexpected is that we had a phase of excessive liquidity. It is not a shortage of liquidity. It is a shortage of demand. The liquidity was hoarded under the pillow." (I don't quite understand this comment.)

Ackermann said a question mark remained as to which parts of the banking business would be affected in the long term by the recent shake-out.

"I don't think the leveraged loan issue is the big issue," he said. "That is under control. The much bigger challenges are on the other side. What will happen in terms of prices ... in the trading portfolio? And what is the longer term impact on certain businesses?"

Ackermann said that the Frankfurt-based group was already sifting through the wreckage left by the credit storm for new ways of making money. "To buy some of the good quality assets at cheap prices and package them into a distress portfolio, that is something you can do now," he said.

"That is a tremendous opportunity for investment banking. That is very good for us in terms of business model."

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