On Friday, the German daily Süddeutsche Zeitung (SZ) leaked a bombshell – a confidential report by Bafin, the Federal Financial Supervisory Authority, found that German banks were sitting on over 800 billion euros in toxic assets. Just three months ago, the reports coming out suggested the problem was only half as large, 400 billion euros.

I want to make clear the significance of the Treasury’s Chapter 11 bankruptcy plan for Chrysler if Fiat pulls out.  It will mean massive job losses and and a huge down-tick in consumer demand.  There will be no second half recovery. Geithner and Obama will look very much like greenhorns and lose a lot of [...]

Press reports coming out of Germany are suggesting that the Germans are looking to hook up Opel with Fiat in order to prevent a lot of job losses when General Motors goes under.  In my view, this means curtains for both Chrysler and GM and could spell some massive increases in jobless claims and unemployment [...]

This past Sunday Felix Salmon wrote a post called “10 reasons for the lack of German econobloggers.” I found it inaccurate and offensive. Let me tell you why.
I was in Germany at the time I read the post and had been there for the better part of the week. In reading and [...]

There is quite a buzz in the German press about Hypo Real Estate. But, what should really get oe’s attention is its massive off-balance sheet exposures (hat tip Ulrich). The long and short of reports is that Hypo Real Estate has assets valued at 1 and 1/2 times its entire balance sheet in off-balance sheet vehicles. This would bring total exposure to German taxpayers to a cool one trillion euros (1,000,000,000,000).

This video does not mention Austria by name, focusing instead on Ireland, Spain and Greece, but Austria is more of the problem for the Germans as they are leveraged to Eastern Europe.
German Finance Minister Peer Steinbrueck became the first senior policy maker to broach the topic this week, saying some of the 16 euro nations [...]

This morning, Commerzbank, based in Frankfurt, Germany, released earnings, showing a loss of 809 million euros, which was better than expected. Shares are rallying in European trading as a result. However, the big news was the draconian solution the bank has taken to eliminate its dividend and halt all bonuses to preserve cash and increase capital — an example I expect to set the gold standard for beleaguered banks going forward.

Niels Jensen from Absolute Return Partners based in London sent me the following insightful analysis regarding the Euro, the possibility of Eurozone default, the possibility of a Eurozone bust-up and all things European. As Niels is snowed in under 8 inches of snow in wintery London, he obviously has had the opportunity to craft a piece of brilliance.

A few months ago, the Germans were very resistant to the notion that Germany would also suffer greatly in this global downturn. Yet, as the months have past, it has become increasingly apparent that exports from Germany and retail spending in particular are hurting. As a result, the German government has joined the bailout and stimulus crowd.

Germany is proof positive that this is not a moral debate in which only the irresponsible and overleveraged suffer, individually or as nations. After all, the Germans received almost none of the upside during the housing bubble. I suggest those who want to label the downturn a case of just desserts for bad behavior read a few history books on how financial crises drag down the good with the bad.

This just in from the German daily Der Spiegel: German banks are still loaded with risky U.S. assets, only a fraction of which has been written down. If this report is true, it suggests that the entire German banking sector is extremely undercapitalized and vulnerable to further writedowns going forward. However, German Finance Minister Peer Steinbrueck refuses to set up a state-controlled ‘bad bank’ as the UK has done and Sweden did before it.

You should also note that this story reveals that Deutsche Bank is the latest bank to end all proprietary trading activities. The business model of banks risking their own capital through large bets, trading for their own account is over.