Deutsche Bank's Reckless & Destructive Path (w/ David Enrich)
ED HARRISON: Hi, I'm Ed Harrison, your host here. I am talking to David Enrich who is the author of the recently released and acclaimed book, Dark towers. It's about Deutsche Bank. Welcome. DAVID ENRICH: Thanks for having me. ED HARRISON: I think this is a really great book. As an aside, I used to work for Deutsche Bank a long, long time ago, so I'm really interested in diving into some of the transformations there because I was there on the scene and saw some of the things that were happening. What led you to write the book? DAVID ENRICH: I've been obsessing unhealthily about Deutsche Bank probably for the past decade, believe it or not, and I moved to London. I was working with the Wall Street Journal at the time. I moved there in 2010 right after the global financial crisis, but right at the dawn of the European financial crisis and Deutsche Bank was looming over Europe as this big, dark, impenetrable cloud. As a journalist, there is nothing that attracts an investigative reporter more than a big, dark, impenetrable cloud. There was Deutsche Bank and I really wanted to get inside of that dark, impenetrable cloud and struggled for many years to do so. Really, I've been focusing on the bank and its financial problems and its opacity for a really long time and ultimately, that yielded this book. ED HARRISON: I think we were talking just before the cameras started rolling about how a lot of the mainstream outlets will focus on the Trump factor, and we'll certainly get into that. I think from my perspective, it's really about the financial system. I want to go back to the transformation that Deutsche has made over the last 20, 25 years to get a sense of how that banks transformed and how that's emblematic of the transformation that we've seen in the system. What did Deutsche Bank look like before it became this giant financial behemoth? DAVID ENRICH: Let me just say before I even answer that, that I think that's a really good approach because Deutsche Bank in a lot of ways, it's an interesting tale of its rise and fall but it also is just as nearly perfect case study in how not to run a major global financial institution or major global company of any nature, really. I think it's a pretty interesting tale. Deutsche Bank was founded in 1870. This is its 150th birthday, happy birthday. It was founded as basically an institution that was supposed to help German companies spread their wings internationally. This is the dawn of the industrial era. They're big, proud German companies like Siemens in particular that were looking for a German bank that could help them, help finance their projects all over the world, really. That's what Deutsche Bank was doing, it was also financing infrastructure projects, really, basically in most continents in South America, in the US, all over Europe and Asia. It was a pretty traditional institutional lender that was really helping the economy grow at a point in world history where there's a lot of economic growth to be had, and that trajectory went on basically uninterrupted for about six decades. Deutsche Bank was becoming one of the biggest banks in the world even at that point, and this is obviously an era before globalization. Banks were much more national or continental in nature than they are today, but it was becoming one of the biggest most important financers of infrastructure and development and industrial projects anywhere in the world. Then in the 1930s, the Nazis come to power in Germany and Deutsche Bank goes from being this international development bank to being the financial wing of the Nazi Party essentially. It helps bankroll the German military, it helps pay for the construction of concentration camps, helps pay for the manufacturer of poison gas and for selling gold, some of which was extracted from the teeth of Jews for the Nazis all over Europe and Asia. It'd become very quickly goes from being this global bank to being one that is focused on helping Germany take over the globe, which in fairness to Deutsche Bank was something a lot of big German companies were doing at the time. ED HARRISON: They were basically co-opted into it because state capitalism, that's what the National Socialism was. DAVID ENRICH: Yeah, that's absolutely right. Although, I would argue, especially with the benefit of hindsight, that this was an institution, and these were executives at this institution who got pretty caught up in it as well. They were not members of the Nazi Party, and one of the bank's leaders at the time was serving on the board, not just at Deutsche Bank, but of the chemical company, those manufacturer of the gas, this is not a case of them just following orders. This is a case of them looking to continue to thrive in an era where thriving meant being complicit in genocide. That's a trade that they made. After the war, they were accused, the institution was accused of being a war criminal and its leader was convicted of being a war criminal. The US tried to liquidate the bank and that would have been the end of Deutsche Bank, except that the British government, which was still owed reparations from World War I from Germany, really wanted Deutsche Bank to exist and they helped basically pulled Germany out of this deep depression that it was in, helped rebuild Germany, and helped rebuild and reunite Europe. The Brits prevailed and Deutsche Bank over the next several decades became, once again, one of the leading financers of development, infrastructure and corporate projects all over Europe, and it played a really leading important role in the reconstruction, redevelopment and ultimately, the reunification of Europe. ED HARRISON: Where were the French by the way during that period of time, what were they thinking about? Because my understanding is they were against letting the Germans rise up, if you will. DAVID ENRICH: Yeah. The French had some trust issues with the Germans. It's interesting. I actually don't know the answer to what the French view on the liquidation versus maintenance of Deutsche Bank was. That is interesting, because Berlin obviously was split into quadrants. The Deutsche Bank's old headquarters happened to be in the British quadrant. That was a very fateful random outcome, but it meant that the Brits ultimately were the ones who had a say over what was going to happen with this bank. It didn't just get back to normal. It's actually split into 10 or 11 different little institutions, but they all continue to operate basically under the Deutsche Bank umbrella and within less than 10 years, they were legally and formally reunited themselves. ED HARRISON: Deutsche Bank, Deutsche means German and when people think of the bank that is Germany, that's the first bank that they think of. The leading German bank in terms of, as you said, bringing Europe back together, reunification, when we get to the reunification period and beyond, what does Deutsche Bank look like compared to say, other national banks, the likes of UBS or of BNP Paribas and those kinds of institutions? DAVID ENRICH: Through the 1980s, the banking industry was really pale in comparison of what it became in the '90s, 2000s and even today. These leading national champion banks, whether it's in Germany, or Switzerland, or France or the UK, are really much more traditional lenders than what we've seen today. They're providing slightly different services depending on the geography and the Swiss were always really big in wealth management for example, but these are banks that had, in Deutsche Bank's case, a limited retail presence. They've been founded, by the way, with zero interest and serving retail investors, purely an institutional focused bank. It remained that way, for the most part, and they did have a retail franchise, but it was not that exciting, in part because retail banking in Germany is not very lucrative. I think the same goes for the international footprint of a BNP Paribas or a UBS or Deutsche Bank, it was in serving big companies from their home countries and from the continent, helping them finance projects overseas. It was a pretty plain vanilla type of business activity and that increasingly into the late '80s became a problem for banks like Deutsche Bank, because the world was globalizing at this point and it was becoming much easier for investors to whether they were in Germany or the US or Hong Kong to have a choice in where they put their money. If they wanted a certain amount of exposure to a big international bank, they obviously are going to look for the investment opportunity that presents the highest returns. If you're an investor, that used to be that that's in Germany, but in usage, it's automatically have a choice between two or three big German banks, you've now got a menu that expands on the globe, pretty much. Banks like Deutsche Bank were looking and watching with increasing envy and alarm as US banks, especially the old Wall Street partnerships converted into publicly traded companies and were just minting money and had returns on equity that were orders of magnitude higher than what Deutsche Bank was achieving. The same goes for UBS or BNP Paribas or any number-- Barclays in the UK. The solution to that at the time was pretty simple. It was that banks like Deutsche Bank needed to get into the same game that allowed to the Goldmans and the JP Morgan's and the Citi Groups of the world to be just raking in the revenue, and that was Wall Street. It was investment banking, it was sales and trading, and it just opened up this entire new world of opportunity for these banks. ED HARRISON: That's basically when it all started. That's when the transformation happened. What time period are you talking about? Who was at the helm at Deutsche at that time? DAVID ENRICH: The CEO of Deutsche Bank at the time was a guy named Alfred Harryhausen, who was he had been-- and he was a statesman in Germany and internationally. He was one of the world's leading advocates for the forgiveness of third world debts, for example. He's someone who took a very global and almost diplomatic role or view of his role and his bank's role in world affairs. He wanted to make money, but he also viewed Deutsche Bank as having this historical responsibility for making the world a better place. The view was that in the long run, that's good for profits for Deutsche Bank because of the global economy is growing, that lifts the financial system along with it and so he dove into this by buying in 1989 this venerable British investment bank called Morgan Grenfell, which was an offshoot of the old JP Morgan Empire. That was a first baby step that Deutsche Bank took into the wild Western world of investment banking and sales and trading, but it was a very small step. Within several years of that, it became clear-- Harryhausen, by the way, was assassinated barely a week after announcing the Morgan Grenfell acquisition, he was viewed as this great symbol, in Germany, this symbol of global capitalism and so he was assassinated by I think it was a group called the-- ED HARRISON: RAF. DAVID ENRICH: Yeah, the Red Army Faction, which was trying to have viewed Deutsche Bank as the, I guess, the vampire squid of the time and that turned out to be obviously assassinating people is not a good policy decision for the most part, but in this case, it turned out to be especially bad, because Harryhausen's replacements were people who viewed Deutsche Bank's mission as much narrower and much more oriented toward maximizing short term profits, than Harryhausen, the statesman, had viewed it and so the mission of Deutsche Bank went from under Harryhausen and his predecessors, their goal is to serve a bunch of different constituencies, shareholders are one of them but so are customers, so are employees, so are the communities in which the bank operates so it is really the global community. It went from being that broad, holistic view of things to being a much narrower vision, which is that we exist to serve our shareholders and in the short term in particular and so a succession of executives after Harryhausen's assassination, they really stepped on the gas and dove headfirst into Wall Street and the City of London as really the defining generational opportunities that they faced, and the result initially was very successful. Deutsche Bank went from being essentially a non-contender on Wall Street in the City of London within several years and having spent billions of dollars hiring people in the US and in London, became a formidable competitor to the really established Wall Street banks. It was one of what I described in the book as one of the great migrations in Wall Street history where the leaders of Deutsche Bank are, who themselves are Credit Suisse or Merrill veterans, are hiring thousands and thousands of people in a matter of months to come build from the ground up this swashbuckling new investment bank. ED HARRISON: Actually, we were talking about this maybe two days ago, and I was telling you, that's when I came to Deutsche Bank in the late '90s. It was under I think Breuer was the head at that time, and Edson Mitchell was a Merrill guy, was the guy who was bringing all the swashbucklers in and he brought in Anshu Jain who later became the CEO. It was under the guise of Deutsche Morgan Grenfell. They took the Morgan Grenfell acquisition and made it into this is who we are now. As I remember, that was exactly what all the other investment banks were doing, SBC Warburg, there was Dillon Reed. We had [indiscernible], who went on with-- DAVID ENRICH: Well, that is a name I haven't heard for quite some time. ED HARRISON: All of the continental banks were taking these investment banks in the UK and saying, look, now we are just as good as the Americans. We have this Anglo-American thing, and we're going to do it in London. It seemed that London was the place to be. DAVID ENRICH: Well, London's in the middle of the world. In a lot of ways, it's the middle. It's a time zone that bridges Europe or bridges Asia and the US. It's a melting pot, you've great easy access to markets all over Europe, Middle East and Africa. Also, it just traditionally going back many centuries is a global financial crossroads for the world. This became, especially for European banks, London became this new financial hub where, through a combination of acquisitions and very aggressive hiring, all of these banks started to remodel themselves in the Wall Street model. I would argue none more successfully and comprehensively than Deutsche Bank. ED HARRISON: What does that mean, like the Wall Street model? What was different about the Wall Street model than the model that Deutsche and these other banks had before? DAVID ENRICH: Well, there was just, for the most part, they didn't have big sales and trading operations. They would help, if Deutsche Bank pre, let's say pre-1989 or probably even pre-1995, if they had a big European client, they wanted to say, I don't know, wanted a loan to build a railroad in Brazil, Deutsche Bank would probably provide the loan to do that. What it would not do, though, is provide any hedging services. It wouldn't provide derivatives to protect them against swings in interest rates or any political or environmental event or weather instability, anything like that. It wouldn't provide foreign currency services on any sophisticated level, it maybe would help convert dollars into Deutsche Marks into I don't know, other currencies but it's not for writing any-- ED HARRISON: Advance, bespoke type of services. DAVID ENRICH: Yeah. In other words, helping the companies deal with, in a sophisticated way anyway, of having an increasingly global workforce. It was built for a very simple time when a company would come to Deutsche Bank and need a loan to finance a particular project in a particular of the world. That's a pretty simple solution, to provide, you underwrite the loan, you can look at the risks, and then you set interest rates and loan terms based on the risk so that you make a profit, but a very easy or very simple service override. It was just being left behind by these Wall Street banks that could come in, offer these products with all these bells and whistles, they were offering the prospect of more or less complete protection from any uncertainty in the future. For that privilege, the banks would charge very fees. That made-- but look, those are valuable services. If you can eliminate risk from a business, that's the holy grail of capitalism. Of course, it didn't quite work out that way, but Deutsche Bank viewed the rich pool of profits that awaited and the ability to be able to serve clients, their clients and new clients in a comprehensive, global way as a very attractive proposition and I think that is part of what lord all these other banks down the similar path as well. ED HARRISON: Extensively, their huge balance sheets are a benefit to them relative to the likes of Morgan Stanley, Merrill Lynch, or Goldman Sachs, who were the guys who were coming in, along with JP Morgan. JP Morgan obviously had the balance sheet as well. DAVID ENRICH: Especially at that time, for Goldman, or Morgan Stanley became banks. Deutsche Bank had, like some of its competitors had this ability to they were taking in huge amounts, through deposits and through ability to borrow in the markets that they could then lend out or use for other purposes at a much lower cost than a Goldman or a Morgan Stanley and so that provide them a huge advantage. Their balance sheet grew very quickly as a result of doing that. For a while, as long as it was a benign macroeconomic environment and a benign regulatory environment. This was a very easy way to very quickly become a global player. ED HARRISON: That begs the question, my next question was, it sounds great so what went wrong? When we talk about the Trump connection is emblematic of what went wrong, what was it that went wrong at Deutsche Bank? DAVID ENRICH: Well, what went wrong is that starting in the mid to late-90s, a succession of top executives none more so than Joe Ackerman, who was the CEO from 2002 to 2012, just completely lost sight of any-- they stopped having anything resembling a long-term view of the business, they began operating with an obsessive and singular focus on short term profits. That sounds simple and it sounds obvious, but it took over the bank. ED HARRISON: Can you give me an example? DAVID ENRICH: Yeah. Ackerman, in I think 2003, he became CEO and he decided that the way to increase Deutsche Bank stock price in the short term was to substantially increase the bank's return on equities, basically the profits that go to shareholders essentially. It was in at that moment, I believe it was 4% return on equity, which is a very low number. He wanted it within two or three years to hit 25%. He wanted to go up six-fold. Look, 4% is very low but 25% is very high, especially for a financial institution that's supposed to be playing this intermediary role in the financial system in the economy. ED HARRISON: Especially given the size of its balance sheet as well. DAVID ENRICH: And given how achieving something like that in the space of 24 or 36 months requires like stepping on the gas isn't really the right analogy, that's like turning on like the rocket engines and then like tossing some like, I don't know, explosives in there then seeing what happens and that's basically what happened. Deutsche Bank, first of all, they achieved these milestones scheduled on Ackermann's schedule which is where we're at present, but they did it at a very expensive long-term proposition, which was that they stopped investing in anything that cost money. That means they stopped investing in technology, their internal technology systems as they hired teams of traders and sales guys and as they made acquisitions, they went from having a small handful of technology systems to having several hundred, probably more than 1000 technology systems inside the bank. These are computer systems that don't talk to each other, so it becomes almost impossible, if you ask a seemingly simple question like, what is Deutsche Bank's exposure to, I don't know, crease? There's no answer, or there is an answer, there's just no way to figure out what the answer is, which is a terrifying prospect if you're a bank CFO, or if you're an investor in a bank, or if you're a regulator of a bank. They didn't invest in compliance. There were these compliance and anti-money laundering stabs. Those are cost centers. They're expensive to hire. They're expensive to train, and they literally cost you business, their job is to say no to transactions. If you're trying year after year, quarter after quarter, to hit these very aggressive profit milestones, that just gets in the way. I think the most important thing, though, is that the financial incentives up and down, the hierarchy at the bank changed very rapidly to reward this short-term return on equity goal. The way that would happen is that bankers, traders, and just like even someone working at Deutsche Bank branch in the middle of Germany, they no longer were just doing business with whomever who seemed like a good credit risk. They were told to evaluate all relationships on the basis of a simple question, which was, will this relationship or this transaction generate a 25% return for the bank, and most don't. Generally, banks are not earning 25% returns on normal transactions, nor should they be by the way. ED HARRISON: That's a huge number for a state business. DAVID ENRICH: It means that they're either drastically overcharging their customers, which just isn't going to work because their customers will go to a bank that's charged and lower fees or lower interest rates, or it requires you, and this is the path the bank ultimately took, to rip off your customers, to break the law, to act without any sense of ethics. That is exactly what they did. The seeds were sown for this great catastrophic parade of financial scandals of the bank years later would find itself immersed in and at the time, that was a direct result of people again, up and down the hierarchy, being told this is serious. You need to achieve these targets, you, yourself, your group, your team, your division, the company needs to hit these targets, or else Joe Ackerman who has this terrifying temper and has a tendency at times of calling people out in public for their failures is going to potentially fire you or humiliate you or just get extremely angry at you. In financial terms, within the bank were changed so that people's compensation was based on hitting these targets. Humans respond to incentives. That's simple. I think also probably the most important determinant of success or failure within these institutions. People are given financial incentives, and they respond to those incentives in fairly predictable ways. In this case, the incentives were clear, it was to maximize short term profits, do not worry about the next quarter or the next year, much less five years down the road, hit the targets now or else. ED HARRISON: That reminds me, as you say that just as an aside, of Wells Fargo, and all the things that we know about what happened with regard to the fake accounts and things like that, you incentivize a certain behavior, and sometimes you get those-- DAVID ENRICH: It turns out that if you're telling branch managers that you need to open X number of accounts in a month or a quarter, they're going to do it and they're not going to, if you're not incentivizing them, not to break the law or rip off their customers or act unethically. It is very simple human psychology, it's not even human psychology, it's basic economics. You're going to when you reward people for behaving in a certain way, they, all else being equal, will behave in that certain way. ED HARRISON: When you were talking about all the different ways they can hit this 25% bogey, the one thing that I wanted you to say and that we're going to talk about is they could also go out the risk curve, and start dealing with customers who are riskier than others because to me, that's where Trump enters the picture. DAVID ENRICH: That's exactly where Trump enters the picture. The relationship between Deutsche Bank and Trump started in 1998, just as the bank was trying to carve out room for itself in the United States market. Basically, the way to do that for Deutsche Bank was they needed to find customers that were for one reason or another, not bankable or not banked by the better-established players on Wall Street or in the US market. ED HARRISON: Let me just drill down on that for a second. Because when you say that they needed to find customers who weren't banked by other banks, why is that? Why couldn't they go up to offer better rates to great customers? DAVID ENRICH: Because offering better rates isn't profitable. You want to offer high rates and you don't want to get into this bidding war with the rest of Wall Street where they have better relationships. They have deeper rosters of clients, and they have more employees. They've much greater sophistication and much greater reputations. You want clients who basically don't have a choice, you can charge them more, and they'll be really loyal to you. Trump at this time was just coming off a series of defaults in his Atlantic City casinos and his companies declared bankruptcy a number of times. Not surprisingly, those are things that do not make you particularly attractive as a potential borrower for a mainstream bank. He was really eager to be shifting his business from being this casino guy to being a big New York real estate developer. To do that, it was absolutely essential that he establish a good relationship with a major bank that would finance this what he was hoping was going to be a buying and development spree in Manhattan and elsewhere. He meets Deutsche Bank, and it is essentially a match made in heaven that he, Trump, gets what he wants, Deutsche Bank gets what it wants, and off to the races they go. ED HARRISON: What went wrong with that relationship? When you look through and uncovered how that relationship formed, it all seems he's now the president of the United States, Deutsche Bank was sitting pretty after the financial crisis. DAVID ENRICH: Well, within a couple of years of Deutsche Bank starting to lend hundreds of millions of dollars to Trump, the predictable begins to happen, which is that Trump as this is want to do at this point, starts defaulting on debt and the first time you did this, Deutsche Bank head arranged, I believe is a $400 million junk bond offer for one of his casino companies. It was a really hard sell for the Deutsche Bank sales guys who were doing this, they ended up having to really jack up the interest rates on the bonds to find buyers. Trump actually, that's one of my favorite little tales from this book. The sales guys have basically given up. They did a road show with Trump and there are no buyers for the bonds. Trump basically requests in a meeting with the sales team, which is granted, and he comes in he says, listen, guys, I know this is not the easiest deal to pull off but if you can do this deal, if you can sell these 480 million bonds, or whatever it was, you will be not only will you get paid, but you will be my personal guests for the weekend at Mar a Lago. Talking about incentives, these are bankers and sales guys who are getting paid a lot of money and yet this here is something that money cannot even buy. Being Trump's personal guests, being flown down there on his 727 and spending the weekend with him was something quite special and it actually did the trick. The bankers did the deal. Afterwards, just as an aside, the guy who's running this desk, reminded Trump, he said, we pulled this off, now don't forget what you promised my guys. Trump is like, what did I promise? He tried to wiggle out of the agreement, he did eventually come through and he flew everyone down to Mar a Lago. It was a great weekend together. Then a few months later, he defaults. That doesn't cost Deutsche Bank money, but it means that all of the customers to which they had just sold these bonds get screwed and that is the end of this particular arm of Deutsche Bank doing business with Donald Trump going forward, but it doesn't derail the overall relationship with a bank being there. Within Deutsche Bank, remember, people are compensated not based on the entire company's performance, their comp is based on a much narrower band which is their personal performance or their team's performance. This has not changed the equation for people, in this case in the commercial real estate business at Deutsche Bank, which are still very eager to strike up a profitable relationship with Trump. In 2005, they do it once more, they do this 640-million-dollar loan to finance the construction of the huge tower in downtown Chicago. Once again, Trump is wining and dining with the bankers and showing them a great time and they do the deal and everyone's happy for about two and a half years and then the financial crisis hits in 2008 and Trump asks for a six-month extension, which he's granted. Then the final due date comes in November of 2008 and Trump owes a lot of money, including 40 million that he had personally guaranteed to those connected to his personal assets. What does he do? He looks around. Alan Greenspan had just referred to the financial crisis as a credit tsunami. Trump asked his lawyers go through the fine print of the loan documents and in the loan documents is this very typical provision, an act of God provision, that means that if there's an unanticipated natural disaster or something like a tsunami, for example, it can void aspects of the contract. Trump sues Deutsche Bank claiming that the credit tsunami that Greenspan have just described constitutes a contract voiding act of God. He then sues Deutsche Bank for seeking $3 billion in damages, accusing Deutsche Bank of having caused the financial crisis and of having engaged in predatory lending practices against him, Donald Trump, by trying to collect on the loan that he owed them. Once again, we have an arm of Deutsche Bank, in fact, this time, it was really the whole bank saying, this is humiliating. We're done with Donald Trump and eventually, the litigation gets settled and Trump agrees that by 2012 or so, he has to repay a substantial portion of what he still owes, including the $40 million that he personally guaranteed. Trump is once again in a situation where he needs to find another bank and he's going to continue building and buying stuff. If he's not going to use his own money to repay Deutsche Bank, he needs to find a bank and no one's going to touch him because he keeps defaulting in a very public way. What does he do? Well, he goes to a third arm of Deutsche Bank, in this case, the private banking division, and strikes a yet another relationship and gets Deutsche Bank in this-- ED HARRISON: What year is this? DAVID ENRICH: This is 2011. The private banking division, which is what caters to the richest of the rich basically wants to reestablish a relationship with Trump. This goes up the chain of command of the bank and a huge fight erupts because the investment banking and the commercial real estate guys and the sales and trading guys are saying, no way can you do this and not only don't do it, because it's not smart, but this is humiliating for us like we have already been burned by this guy repeatedly at this point. Why on earth would you do this? The CEO, Joe Ackerman, still finally gets to him and he says, go ahead, do it. The first loan that Deutsche Bank does in this new relationship is a $48 million loan to Trump that he uses to repay what he still owed this other arm of Deutsche Bank for the defaulted loan. That is, I've never seen anything like that. One arm of the bank giving 10s of billions of dollars to a guy who's already defaulted to repay this other arm of the bank. That is, most institutions would not, in fact, I think almost any financial institution would not do that in a million years. ED HARRISON: Well, let me play devil's advocate here for a second and what I mean to say is, is that maybe this is when you look at deregulation, and all these things and the fact that Deutsche Bank was trying to get into the US market, this is a microcosm of what was happening in the US that the lax regulatory environment and their need to get customers caused them to do that, that if it were in, say, Germany or the UK, it wouldn't have happened. DAVID ENRICH: I don't know. I think this, look, it's certainly true that regulators were nowhere to be seen. Deutsche Bank is a great parable for this epic failure of regulators in the US, in Germany, the UK less so actually, but it at least in this particular case, and yeah, this is a peculiarly American saga at this point, because this is a foreign bank trying to make a name for itself with the richest of the American rich, in the middle of New York and people don't know Deutsche Bank's name. They couldn't pronounce it. They've really struggled to make a name for themselves, and here comes Donald Trump, the guy who is the star of the apprentice and is very famous for good reasons and bad and it's very enticing if you're a foreign bank trying to make it name for yourself and establish yourself in a country like the US to throw caution to the wind. I think the better argument in Deutsche Bank's defense here is that this last batch of loans that Deutsche Bank did, which went from 2011 through 2015, so leading up to his presidential campaign, there's about $350 million of loans over that four- or five-year period. Those loans, actually, were probably not horrible credit risks. Trump, one of the concessions that Deutsche Bank extracted out of him for these final series of loans was that he had to provide personal guarantees, basically, comprising the vast majority of the loans. Through a combination of pledging his personal properties as collateral, or just having 10s of millions of dollars in wealth management accounts of the bank that were presumably seasonable if he were to default on loans, from a purely credit risk standpoint, these loans were probably pretty safe and indeed, there's no reason-- We don't actually know what their status is today in 2020, but we have no particular reason to think that he hasn't kept up with the payments other than the fact that that's been a pattern of his of not keeping up with the payments, but probably from a purely dollars and cents standpoint, those were prudent loans. They weren't very high interest rates. In fact, they're quite low but they charged a lot in fees. Trump had to keep a bunch of money in wealth management accounts at the bank, which also generated fees for the bank. What that pure dollars and cents calculation does not count for at all are the reputational risks associated with doing business with someone who is a consistent default risk and who, at the time these loans were made, was exhibiting some personality traits that frankly, were not desirable for other banks and whether he was engaging in demagoguery, he was accusing Obama at that point of not being American born and therefore being an illegitimate president. Those are things that other banks when Trump would come by periodically to see if he could get money, they were aware of the public profile this guy had and especially after the financial crisis, banks would become much more attuned to the reputational risks associated with doing business with people that were going to be in the headlines for the wrong reasons. Trump triggered those red flags. For Deutsche Bank, they were so interested in-- they're viewing this, first of all, through an entirely financial prism, not a reputational one at all. They were really looking at it in the short term once again, and from a short-term financial perspective, these loans made sense. ED HARRISON: I want to think about the whole arc, narrative arc here in terms of Deutsche Bank as potentially emblematic of the financial system and how a bank like this with lax controls and this ROE target that's unreachable can continue to go on. My understanding is that when the financial crisis happened, Deutsche Bank actually came out of the crisis relatively well, that it seemed that they were doing well. Then by the time we get to the European sovereign debt crisis and beyond, suddenly they're the sick man of Europe. What happened in that timeframe, and how does it fit into the whole concept of they're taking on too much risk? DAVID ENRICH: That's a really good question. Deutsche Bank the enters the financial crisis with one of the biggest shorts on the US housing market of any bank. Goldman rivaled it for a big short, but it was the bank's traders had anticipated correctly the collapse of the US housing market, and a bunch of trading desks at Deutsche Bank made billions of dollars in profits off of that, which largely but not entirely compensated for the huge losses they, like many other banks, were suffering. Deutsche Bank did emerge from the crisis with a-- it had a relatively good crisis. It wasn't a relative position of strength. It also turns out many years later after the fact you can look back, and they appear to have been playing some really ridiculous accounting games with the valuation of derivatives and other assets, that if they had been accounting for that, and I don't want to say a more honest way, but in a more traditional way, their finances would have looked a lot worse over the time, and they may well have required a government bill but as it turned out, they didn't require direct taxpayer assistance. They got a bunch of loans from central banks and some of their trading partners got bailed out, but they came out of the crisis at or near the top of the global financial pecking order, which is quite an accomplishment. It led to Ackerman, Joe Ackerman, the CEO at the time and some of his underlings, including Anshu Jain who would be his successor, were extremely proud of the fact that they had emerged relatively unscathed from this once in a century crisis, and that pride contributed directly to the catastrophe that ensues because they come out of the crisis feeling really good about themselves, mistaking their luck for scale, to a large degree, and they forego this golden opportunity they've been given to fortify themselves. They do not invest in upgrading their technology or upgrading their compliance departments. They do not take this opportunity to read the bank of these hundreds of billions of dollars of risky, really very risky, in some cases, very illiquid assets that are polluting the balance sheet. They don't take this opportunity from a position of strength to go to shareholders and say, look, we survived without taxpayer assistance. That's great fortunate for us but right now, we need to fortify ourselves and bulk up our balance sheet and we need to-- or not bulk up our balance sheet, bulk up our capital and we need you guys to pony up more cash. Instead, they spent what money they had on growing fast in risky areas, especially in the US market and in emerging markets as well. At the same time, all these other banks that have been hobbled by the crisis, especially in the US, were forced by the Bush and then Obama administrations to take these hundreds of billions of dollars in taxpayer capital, which were extremely controversial at the time, but ended up saving the American-- not only saving the American financial system, but also getting it back in order at a pretty rapid pace, all things considered. Deutsche Bank went from being the survivor of the crisis to be in a period of months, to being the sick man because all these American banks have been recapitalized, they've been forced to consolidate. They've been forced to clean up their balance sheets, and Deutsche Bank, not having received any government assistance, has a relatively thin capital cushion and is not facing any pressure from Germany or anywhere else to slim down, curtail risks. Instead, it seizes what it perceives an opportunity to basically take over the world. It just goes way too far in that direction way too quickly. Then the European sovereign debt crisis hits, and Deutsche Bank has exposure all over Europe and Greek government bonds are the famous case because of the Greek government's instability and precarious finances. Those were paying very high yields, which made them very attractive to a bank like Deutsche Bank, which is trying to goose its returns. They were one of the biggest owners of Greek government bonds, which ultimately and you know the story, they basically got wiped out or there's a huge risk of them being wiped out. At the same time, investors newly attuned to the risks of leverage and derivatives from the crisis are taking a much closer look at Deutsche Bank's balance sheet and realizing that this is an institution that pre-crisis had a 50 to one leverage ratio and that had trillions of dollars on its balance sheet, not counting the trillions of dollars of off balance sheet derivatives. They're looking at this and saying, oh my God, this is terrifying. ED HARRISON: By then, it was basically too late because number one, the "no bailout" clause was pretty much everywhere. We're not going to bail out these Italian banks. We can't bail out Deutsche Bank, that is no taxpayer money. There's no tarp for you guys. DAVID ENRICH: Well, at least not with wiping out your equity. You can bail them out, but the first step is going to be to put the stock at zero. That is a very scary proposition for a bank or for its executives who are holding lots of stock themselves. The risk of that is extremely destabilizing for a bank because it means that touching that bank financially, you carry a risk of being completely zeroed out, which is not an attractive risk for especially given the returns were not very high. Deutsche Bank, there was a small window of opportunity Deutsche Bank had right after the financial crisis that it could have taken and probably saved itself. The seeds of destruction had long since been planted. Okay, they're under the ground starting to spring up into these huge plants. Now, this is not a good analogy. Instead of uprooting those seeds of destruction, they watered them happily. It was just out of control really, in a matter of months, honestly, even though the catastrophic nature of this didn't become entirely clear for a couple of years. ED HARRISON: Where does Deutsche Bank go now? What does it say about what needs to happen to the financial system as a whole as it stands right now? DAVID ENRICH: Well, now in 2020, the bank and its executives, there's a new management team in place, and it is scrambling to save itself really. Last year, they seriously considered merging with Commerce Bank, which at that point, the number two German lender and that was a merger that was being brokered by the German government because they're trying to save these two very sick banks. Those talks end up falling apart because people realized that merging two big sick banks together were just going to create one very big stick bank, not one big healthy bank, which is-- ED HARRISON: That's what the Japanese did after their crisis, and that didn't work out so well. DAVID ENRICH: No. That's not a recipe for success, the recipe for success is ripping off the band aid and taking your painful medicine and getting it done with and hoping that you're doing it at a time where you have the breathing room, I'm mixing metaphors here, but you have the breathing room to be able to do that effectively. Deutsche Bank did have that opportunity, didn't take advantage. Now, it is racing to shed assets, shed employees, shed business lines, it's trying to retreat to its German roots and be a European lender to European companies. That means shutting down a lot of its Wall Street businesses and a lot of the businesses in the City of London. The bigger problem, though, there's a few problems that Deutsche Bank faces that I'm not sure are surmountable, to be honest with you. One of them is that they just have these still mountains of very risky derivatives and other assets that they do not know what to do with, it's not selling them means they'll have to recognize these huge losses that could essentially bankrupt the bank. ED HARRISON: Is this a Bankers Trust thing, a legacy banking trust, or is that whole derivatives culture came from that acquisition? DAVID ENRICH: Yeah. I was going to say it's certainly a cultural legacy. I'm not sure it's the financial legacy. I think that very much of Deutsche Bank's own doing, but it's certainly a cultural legacy of having bought this derivatives crazed bank at the end of the 1990s, which was a $10 billion deal that very quickly became a $10 billion albatross for the bank. They've got this huge problem, this legacy problem of all of this garbage on their balance sheet that not only is it hard to get rid of, but if they do succeed and getting rid of it, creates a big financial hole for them. That's problem one. Problem two, is that it's very questionable whether they have a viable business model going forward. They're a German business. The whole reason they got into Wall Street in the first place is that the German business wasn't making any money. It's not profitable, and partly Germany is notoriously overbank. There's thousands of banks in Germany, serving a very frugal savings friendly customer base of both individuals and institutions. It's not a great place to be doing business. There are all sorts of economic questions about Germany and Europe as well, obviously. The business model's another problem. The third problem, which in some ways is maybe the greatest problem, I think, is a cultural one, which is that this is a bank with 10s of thousands of employees all over the world. Many of those employees have been very well trained over the years to do one thing and one thing only, which is maximize short term profit. They are not trained to think about this from the flipping the camera angle and looking at this from a self-preservation standpoint, they're looking at this and are compensated for making money quickly. If those incentives switch radically, why work at Deutsche Bank? Last year, as I've reported on this book, I went down to Jacksonville, Florida, where Deutsche Bank has its big compliance and anti-money laundering operations. I spent a few days down there talking to a lot of either current employees or recently departed employees, and just asking them, how it was doing their job? Do they feel good about it? What are their problems? It was interesting. I talked to probably 20 people, I'm guessing, and I heard one variation of the same thing from literally every person I spoke to, which is that people felt that they were being set up to fail by their managers and by executives of the food chain. The reason was that they were being pushed to just churn through transactions. They were not being encouraged or incentivized to take their time and dig deep and err on the side of caution. They were being incentivized to do the exact opposite of that, to clear as many transactions as they could, as quickly as they could. The employees viewed that as just setting them up not only to fail but setting the institution up to fall into more money laundering problems, or bribery problems or tax fraud problems and whatnot. Those are the little scandals that bubble up that can really have enormous problems for the bank in the long term, especially in the US where it's on very, very thin ice with American regulators. There's a foreign bank that operates in the US at the pleasure of American authorities, and there's no guarantee that American authorities will continue to cut the bank a break at this point. The people in Frankfurt who are running the bank right now, they are well intentioned, and they're working hard and I think they get it, but it's not easy to, you can't just say okay, we are going to have a different better culture now. We're rebooting, we're returning to our roots as a proud national iconic German bank. Let's start over. It doesn't work that way. You need to get people, mid-level managers and low-level employees all the way up to the sales and trading people on Wall Street in the City of London, you need to get them all to change the way they're thinking about their jobs. ED HARRISON: It's taken 30 years for them to get to that position, so it's going to take a long time to undo that. DAVID ENRICH: I don't know that they have the time or the capacity to succeed in doing that. Maybe they do, but it's definitely, it's far from a sure thing. This isn't like one of those just like slow turnaround efforts that we know is going to get there because they're providing something of value and it's good for the world. This is a company operating in a very-- a highly commoditized business far from its home markets in a really overstretched way that has had disastrous results. You could make an argument there's not a clear reason for them to exist. ED HARRISON: I like this last line actually. If you were an analyst, I guess you would put a sell on Deutsche. DAVID ENRICH: Well, the thing is their stock is down. It's remarkable. I haven't looked in the past couple days, but it's down about 95% from its peak. There's not that much further down for it to go, honestly. This is not a company that is the stock has been like riding high. It reflects these deep existential investor doubts about its viability. ED HARRISON: At some point earlier, we were talking about Wells Fargo, I thought immediately about companies like HSBC, various other operators out there that have been involved in scandals similar to Deutsche Bank. Deutsche is not really the only one, there are others. When you talk about the three challenges that Deutsche have faces, how systemically do you deal with that when there are all these other companies that have similar if not as deep-seated problems? DAVID ENRICH: I would say the thing that distinguishes Deutsche Bank here is that it's not like it's fallen into one or two scandals, it's been at or near the center of just about every major financial scandal in the world in the past 15 years, which is really quite a remarkable feat. How do you change that for an industry? Man, I don't know. The symbolist way to talk about it, but I don't know that this works, is through policymaking at a government level or a central bank level and you cannot fiat a cultural change but you can change or require changes to compensation systems, for example, that would do much more to reward a performance of an overall company or as opposed to individual traders or even a trading desk. For every solution like that, though, there's almost inevitably a million ways to exploit it and find loopholes, not to mention unintended consequences of doing that. We've seen that in the UK with some of the compensation rules that were introduced after the financial crisis there that have led to base salaries have gone way up, and the variable portion of people's pay has gone down. That's not necessarily a good way of doing things either. You can argue that-- and I think in fact, you should argue that there should be higher capital requirements, tougher leverage ratios, and basically should discourage banks from operating as just these risk loving institutions, as long as there is this presumption that governments are going to come bail them out in a crisis, because right now, there is a very asymmetrical risk proposition for a bank. If they refer a bank employee even more important, if employees are getting a cut of what they earn for the bank, and they earn, let's say, their group earns a million dollars, and they're getting $100,000 of that cut. On the other hand, if they lose a million dollars, it's not like they're losing $100,000. They get zero. It's a very lopsided incentive structure that encourages you to shoot for the moon and not be particularly cognizant of the risks. ED HARRISON: It's not like there are any claw backs per se, there's the whole thing. IBG, YBG. I'll be gone, you'll be gone. What has happened? DAVD ENRICH: Yeah, exactly. Well, claw backs have become more prevalent in the industry. I think that's very healthy. Look, I think the industry, by and large, has made important strides since the crisis to reduce risk. It's not because the banks are like acting morally or ethically, it's because they're responding to investor demands and regulatory demands that their behavior change or otherwise people won't invest in them, or they'll make it much harder to operate. look, I think you can round the edges, it's easy for regulators or investors to push for a more conservative and leaner approach to banking. Banking shouldn't be that profitable honestly. ED HARRISON: I was going to say what countries have successfully made the transition? The first country that came to mind for me was Switzerland. Because when we think about Credit Suisse and UBS, they were really at the center of the banking crisis, right downs, out the yin yang, level three assets, topping up their balance sheet in order to yoke to their capital. Now, they're all about wealth management. They're all about simple banking, they're really not about taking risk. DAVID ENRICH: That's partly a response to sky high capital requirements in Switzerland that have led-- they have just shifted the profitability of different business lines and made it so that sales and trading is just it's way too expensive from a capital standpoint, to be worth doing and yet they have, in part because of Swiss Bank Secrecy laws and tax laws have a natural and long standing competitive advantage in the field of wealth management, in part business, Switzerland's legacy of hiding assets for people. Another example would be Iceland, which has went from-- no one really cares about Iceland, because it's Iceland, but it was the epicenter in a lot of ways of the financial crisis and that it went-- this is essentially efficient economy that the economy is financialized. These huge banks rose out of nowhere, and then collapsed because they were built on just in some cases, fraud. Iceland, instead of just increasing regulation of the banks, took things a big step further, which is that they pursued criminal charges against a lot of the bankers at the tops of these institutions, and they succeeded, and these people went to jail. Laws are what they are in different countries, but the act of personally punishing people at the tops of these powerful institutions, that is a deterrent. If a banker is scared, not just about missing out on a bonus or worst-case scenario losing their job, but is instead scared about their reputation being destroyed, or their freedom being taken away from them, that is very strong reason to reduce your risk taking, whether it's cultural risk taking or financial risk taking, or whatever, it provides you a very strong incentive to make sure that not only are you doing, you're operating within the law, but that 10 years later or five years later, looking back in hindsight, and when investors are digging through your emails or your chat messages, that there is not going to be any prosecutor who could even argue that you were violating the law. Really, that would change behavior in a very powerful, I think, pretty rapid way honestly. Now, again, we live in a country and society that has laws and respects the rights of defendants, and as well, we should, but prosecutors in the US in particular have been just very, very reluctant to pursue high profile criminal cases against people in the finance industry. That is I think, part of the reason that there's been such populist anger over the past decade toward the financial and political class in this country, that it seems like a lot of people's lives were ruined by the actions the banks took, and almost no one at the top of those institutions was held legally accountable for that. ED HARRISON: Okay, so let me just play devil's advocate here for a second, with regard to Trump. The question is, if you're a devil's advocate, you would say, actually, Deutsche Bank, as you rightly point out is an institution that's not well known in the United States. They're trying to make business in America and so they take risks there. The controls that are deficient there are only in the United States that had the same thing happened in Frankfurt or London, it just wouldn't have happened that way. DAVID ENRICH: The special thing about Deutsche Bank is that it managed to create these problems all over the world. There's actually a similar situation to Trump that Deutsche Bank had out of its Frankfurt offices. There was a real estate developer in the mid-90s, named Juergen Schneider, who is developing shopping malls and the like, and Deutsche Bank was one of his primary financial enablers. In fact, some of the shopping malls he was opening were literally across the street from Deutsche Bank's headquarters in Frankfurt. Schneider turned out to be a complete fraud and ends up I believe, getting in a lot of trouble for that. Deutsche Bank is caught essentially with his pants down and they had made huge loans that they had very little recourse on. They got wiped out on those loans. This is around the same time they're getting into bed with Donald Trump and the circumstances in the US and Frankfurt are different, but this is clearly an institution that was throwing normal credit underwriting, blocking and tackling skills, throwing it to the wind. Look, it wasn't just in Germany, either. This is the bank was starving for profits all over the world and very hungry for the profits all over the world, I should say and was doing whatever it could to satisfy its ravenous appetite and so you look at a place like Russia where the bank had operated for most of its history. It goes back to the 1800s where it's financing railroads for the Tsar. Deutsche Bank took a lot of pride in Russia at doing whatever it took to satisfy its clients. By the late '90s and early 2000s, through most of that ensuing decade, what its Russian customers wanted, were money laundering or capital flight services to get their often ill-gotten rubles out of Russia into foreign currencies like dollars, or euros. Deutsche Bank's set up a very elaborate money laundering scheme that enabled its Russian oligarch clients and others, including a bunch with direct connections to Vladimir Putin to get their money out illegally. This was, as were many of Deutsche Bank schemas over the years, this is a great business for them. There were very few other banks willing to take that risk, for the obvious reason that it was illegal. Deutsche Bank was minting money on this, and they were doing well over 10 billion dollars of money. They got out of Russia in an appropriate way. They were charging huge fees for the privilege of doing that, and they could because no other bank was willing to do this business. Deutsche Bank, in this relentless pursuit of profits all over the world, stumbles. Stumbles isn't really the right word. They go pretty deliberately, across the line over and over and over again and the result in the short term is that it's extremely lucrative. The result in the long term is that they face massive government penalties, in some cases, criminal prosecutions, and the reputation gets annihilated. ED HARRISON: Well, one thing that I think is interesting when you talk about the money laundering, is the connection to Trump and that as soon as you speak of money laundering of Russians, I think immediately of all of the assets that he has in Miami and other places where these companies, did you uncover any connection between these money launderers and the Deutsche Bank connection to Trump at all? DAVID ENRICH: What I uncovered, there are a couple of them I uncovered that are not exactly fitting that bill but, in the ballpark, and one was in the mid-2000s when Trump and some of his real estate partners were trying to build big resorts in places like Hawaii, or Baja California. Deutsche Bank organized events for them in London and elsewhere, where basically Deutsche Bank brought a lot of its wealthy clients out to meet Donald Trump and his development partners. Some of those clients who ended up buying big blocks of condos in these planned or actual developments were wealthy Russians, including some with connections to the Kremlin, or to Putin himself. Look, there's definitely, I have no evidence or even real reason to believe that that was money laundering, but it was certainly Trump doing business with anonymous shell companies that were ultimately owned by people that had very close ties to the Kremlin, and who'd made a lot of money in a period when a lot of wealth was going to a very few people in Russia. That's the one thing too, is that around 2015, 2016, 2017. This is before, during and after the presidential campaign, the anti-money laundering specialists in Deutsche Bank's compliance officers found a number of what they regarded as suspicious transactions in the Trump accounts and also the accounts of Jared Kushner and his companies. Some of these involved money that was being moved from those accounts to the accounts of wealthy Russians. That was enough for the compliance officers at Deutsche Bank to think that this needs to be reported to the government as a potential money laundering risk. They type up the suspicious activity reports the way they're supposed to, and normally, it's just you err on the side of submitting those reports rather than not submitting those reports. In this case, it went up through a couple levels of management at the bank and the decision was made not to file the suspicious activity reports. That was alarming to some of the people inside Deutsche Bank in the compliance departments so much so that they complained about it, which is not a not a recipe-- ED HARRISON: Risk [indiscernible] basically. DAVID ENRICH: Yeah, and that's not a recipe for longevity at Deutsche Bank. Sure enough, at least one of these people who spoke up and was very alarmed about this got transferred out of that division and then in 2018, was fired. Look, there is a tremendous amount of smoke linking Deutsche Bank to Trump to Russia. I wouldn't say there's fire but there's a tremendous amount of smoke and a lot of circumstantial evidence. ED HARRISON: That might be one of the reasons that he's like, stay out of my finances, because that's back then, and I don't want to open that up. DAVID ENRICH: Look, this is this is about to come to a head because Deutsche Bank, last spring, these two congressional committees controlled by Democrats subpoenaed Deutsche Bank for all of its Trump records essentially and including not just Trump's tax returns and bank statements and balance sheet information, but also any internal records Deutsche Bank had about potential money laundering concerns or things like that. The Trump family, as soon as those subpoenas were issued, sued Deutsche Bank to prevent it from complying with those subpoenas. This litigation has been working its way through the federal court system and two federal courts have ruled against the Trumps and ruled that Deutsche Bank does need to comply with these subpoenas. The Trumps appealed to the Supreme Court, and the Supreme Court is about to hear oral arguments on this and there's a decision expected by June. ED HARRISON: Ooh, that's a very bad timing. DAVID ENRICH: Well, it depends on your perspective, I guess. It means that if the court upholds these lower court rulings, which there's no guarantee will happen, but if it does, Deutsche Bank presumably is going to be handing over troves of detailed financial information to Trump's bitter enemies in Congress, and that is, look, we don't know what's in those files exactly. We don't know if it's got, we just have no idea what. What we do know, and we get the whole world can see very clearly, is the vigor with which Trump is fighting to prevent these records from being disclosed. That suggests that there's stuff in there that he is very worried about seeing the light of day. Now, that could mean anything. That could mean that maybe he's just not nearly as wealthy as he's purported to be. That's on the benign end of things. On the other end of things, maybe there's stuff in there that shows some unsavory business partners overseas or shows him not paying taxes, or, who knows. I don't want to speculate but there's no question about how Trump has been fighting tooth and nail to keep this stuff out of the public domain. To me at least, that suggests there is something that he's worried about getting out. ED HARRISON: When we think about Deutsche Bank as an institution, overall, faulty in terms of their structure and hopefully fixing it, what character comes out as someone who-- I know in your book, there's a character that comes out as, yes, this is the person that we need to have at that institution. DAVID ENRICH: There's a man named Bill Broeksmit, who is one of the-- I guess he's the protagonist of the book in a lot of ways. Broeksmit was the son of a minister. He was raised in rural Illinois and got into the banking industry as an expert in risk management and derivatives. He joined Deutsche Bank as the first wave of people to come over from Merrill in the mid-1990s. He was the righthand man and actually best friend of Eds Mitchell and Bill climbed up through the ranks. Edson dies in a plane crash in 2000, and Bill after a break from the bank comes back, he's close with Anshu Jain. He becomes one of the most senior risk executives at the bank. Broeksmit developed a reputation in the bank as being this rare character with just very strong principles. He was someone who had the credibility to not only say no to transactions, but to do it in a way that people really generally respected what he was saying. He was viewed internally as the ethical compass of the place for a long time. Risk managers there would view him as this voice of reason in this insane organization that they work for. He climbs up through the ranks. He's at or near the very top of the bank for a long time. Then in January 2014, he's found hanging in his apartment in London, and so the book really uses him in his rise and tragic end as the symbol really for how the bank started off with these really good intentions, and Broeksmit was someone who was a pioneer of the modern swaps market, and really envisioned derivatives as a tool to help clients hedge risks, and really, that's a great revolutionary device that really changed the way big businesses worked in America and around the world. He watched as this product that he had pioneered morphed into something that was much more of a vehicle for financial speculation than it was a hedge, a defensive hedging mechanism for companies and he became very alarmed at some of the stuff that he'd been seeing in the bank. The book traces after his death, that quest that his son goes on to figure out why his father committed suicide. One of the things his son finds is that Bill had been using his Yahoo and Gmail accounts to send and receive thousands and thousands of Deutsche Bank related emails and so there's correspondence with the top executives, there are meeting minutes, their spreadsheets, their loan documents, on and on and on. Val, his son, Val, shared them with me. That become-- it provides this really unusual window inside the thinking of this lonely voice of reason near the top of a major and deeply troubled financial institution. It also just shows the personal toll that some of this really took and Bill Broeksmit, near the end of his life, was haunted by what he had seen at Deutsche Bank and what he was worried he had been sucked into during his time there. In my experience, at least, it's quite unusual to find a human character who so clearly illustrates the perils of this modern banking machine that was created, because this is someone with the best of intentions who got chewed up and steamrolled and have spat out-- God, I'm mixing metaphors again, but who really became a casualty of the bank that he worked for, and ultimately paid with his life. ED HARRISON: Yeah. That's a tragic story. DAVID ENRICH: Yeah, sorry. It's pretty grim. It's very sad. It's also sad because he's not the only person who took their own life at Deutsche Bank. This is part of a grisly pattern at the bank, which is, I don't think it's fair to pin that entirely on the bank, but there's no escaping the fact that there's a pattern there. Frankly, there's a pattern of that in the finance industry writ large over the past decade, and it shows us something is going quite wrong.