Contact Your Financial Adviser Money Making MC
13
February 2017
 |
Deutsche Bank (The Total Investment & Insurance
Solutions)
Deutsche Bank is President Donald Trump’s
largest lender. While the troubled bank has settled several of the charges
against it, it’s still undergoing scrutiny by the Justice Department and other
federal regulators, and is being overseen by six independent monitors, making
conflicts of interest inescapable. The
Total Investment & Insurance Solutions
If you measure President Donald Trump's
conflicts of interest by the amount of money at stake, or the variety of dicey
interactions with government regulators, one dwarfs any other: his relationship
with Deutsche Bank. The Total
Investment & Insurance Solutions
In recent weeks, Deutsche Bank has scrambled
to reach agreements with American regulators over a host of alleged misdeeds.
But because the president has not sold his company, the bank remains a central
arena for potential conflicts between his family's business interests and the
actions of officials in his administration. The Total Investment & Insurance Solutions
"Deutsche poses the biggest conflict
that we know about in terms of dollar amounts and the scale of legal
exposures," says Brandon Garrett, a University of Virginia law professor
and author of "Too Big To Fail: How Prosecutors Compromise with Corporations." In trying to clear up its outstanding
regulatory troubles, the bank "may have tried to do its best to avoid the
appearance of impropriety but it may be impossible for them to do so."
Deutsche is Trump's major creditor, having lent billions to the president since the late 1990s
even as other American banks abandoned Trump, who frequently bankrupted his
businesses. While the president hasn't released his tax returns, he has made
public some information about his debts. According to these incomplete
disclosures and reports, the Trump Organization has roughly $300 million in
loans outstanding from the bank. Trump continues to own the business, although
he has turned over day-to-day management to his sons.
At the same time that it is Trump's biggest
known creditor, Deutsche is in frequent contact with multiple federal
regulators. While the bank agreed last week to pay $630 million to settle
charges by New York state's top financial regulator as well as the U.K.'s
Financial Conduct Authority that it had aided Russian money-laundering, it's still
undergoing a related federal investigation into those activities, which it is
also trying to settle. That will be an early big test of the Justice Department
under Attorney General Jeff Sessions. The Justice Department also has an
ongoing probe of foreign exchange manipulation by several banks, including
Deutsche Bank.
Even if the bank clears up the ongoing
federal cases, it will remain weighed down by past transgressions. During the
housing bubble, Deutsche Bank misled buyers about the quality of its mortgage
securities and omitted important information. In 2015, its London subsidiary
pleaded guilty in connection with the multi-bank conspiracy to manipulate
global interest rates and paid $775 million in criminal penalties. The Total Investment & Insurance
Solutions
Deutsche will soon have an astonishing six
independent monitors monitoring its conduct — the most ever for one company,
according to Garrett. Drawn from the ranks of consultancies and law firms,
these overseers make sure Deutsche complies with previous state and federal
settlements and regulations relating to its foreign exchange manipulations,
global interest rate fraud, sales of dodgy mortgage securities, derivatives
trading, and sanctions evasion.
Indeed, the independent monitor of Deutsche's
derivatives reporting, Paul Atkins from Patomak Partners, has his own conflict
of interest. Atkins served on Trump's transition team and played a role in
appointing federal financial regulators. He is now monitoring whether Trump's
business partner complies with the terms of a settlement with the Commodity
Futures Trading Commission on derivatives reporting. The Total Investment & Insurance Solutions
A Patomak spokeswoman declined to comment.
Meanwhile, the Federal Reserve has regulators
sitting in Deutsche's offices, as it does with every big bank, keeping a
watchful eye on the firm's safety and soundness. Last year, the Fed failed
Deutsche Bank during its annual stress test, finding that it had insufficient
capital and could not withstand another financial crisis. And the Securities
and Exchange Commission and the CFTC regulate its investment banking and
trading activities.
A Deutsche Bank spokeswoman declined to
comment. The White House did not return an email seeking comment. The Total Investment & Insurance
Solutions
The Trump Organization's wide-ranging
business dealings could raise quandaries for an array of government agencies,
from the Department of Labor, which regulates the company's employment
practices, to the General Services Administration, which leases Trump his hotel
in Washington, D.C. "Just about everything that every branch, every type
of enforcement, every action from every agency could touch on Trump's
conflicts. There is no end to the corruption and ethics concerns," Garrett
says.
But the potential conflicts may be most acute
at the Justice Department. Whether the Justice Department walks away from an
investigation or takes a hard line against Deutsche Bank, its every move will
be scrutinized as either too tough or too weak.
With new management, Deutsche Bank has
embarked on an effort to rebuild its reputation. Deutsche CEO John Cyran has
conducted an apology tour for the bank's multiple and serial misdeeds.
The money-laundering settlement isn't Deutsche's only recent move to close out
government probes. In January, it agreed to pay $95 million to end a tax fraud investigation by the U.S. Attorney for the Southern
District of New York. And in December, it became one of the last of the global
banks to resolve civil charges over
the creation and sale of misleading mortgages investments, agreeing to pay a
penalty of $3.1 billion.
In these agreements, Deutsche capitalized on
the Obama Department of Justice's eagerness to settle, according to defense
attorneys who don't represent the bank but are familiar with the cases.
Outgoing administrations desire to wrap investigations up so departing
prosecutors may shine their resumes on the way out the door. The Total Investment & Insurance
Solutions
The Obama administration had an added
incentive to reach settlements because it worried the Trump administration
Justice Department might seek smaller penalties or otherwise go soft on corporations.
That helps explain why Deutsche Bank's mortgage securities settlement, which
included $4.1 billion in credit for consumer aid in addition to the penalty,
was far below the $14 billion figure reported in the fall as Justice's opening
bid. While most observers expected that figure to come down sharply, Deutsche's
terms were still widely considered favorable.
Even so, Deutsche's share price remains
depressed as investors worry about the bank's future payouts and ongoing
fragility. The bank faces class action suits alleging efforts to manipulate
interest rates and the currency markets.
The Total Investment & Insurance Solutions
Given the government's responsibilities,
Trump's regulators face a fraught and sensitive task of proving their
independence and fair-mindedness when it comes to Deutsche Bank. Prior White
Houses have taken great care to avoid interfering in Justice Department
investigations and prosecutions. Despite his early support for Trump's campaign
and their personal friendship, Sessions has said he will not recuse himself from any Justice Department probe into
the president, the Trump family or any of his political advisors.
The relationship Deutsche Bank has with the
president cuts two ways, defense lawyers and former prosecutors say. It might
be advantageous to be in business with a president who appears to regard the
office as an opportunity for brand enhancement and enrichment. The bank might
hope for leniency from the president's regulators because of its business ties
to him.
There are signs that Deutsche's new
management is not eager to continue serving as Trump's financier. Trump sued
the bank in 2008 to avoid paying a loan for a Trump hotel in Chicago. The
parties settled, but lawsuits have a way of fraying friendships. A former top
executive at Deutsche Bank says the current top management does not like the
real estate developer. "They don't want to do business with him
anymore," he says.
Given the tension, Deutsche may worry about
the mercurial president. The bank's concern is that the Trump administration
could use its regulatory powers to secure better business terms. Nationalist
strains course through his inner circle. A top Trump economic advisor recently accused Germany of currency manipulation. Trump, some
observers fear, may seek to boost American financial institutions over foreign
ones like Deutsche.
In recent months, Deutsche has also sought to renegotiate its loans with Trump, according to a
Bloomberg report, in an effort to reduce its exposure to the president. The
bank hoped to eliminate the president's personal guarantee on loans. But such a
move would not eliminate the conflict of interest, since the president's
company, which Trump still owns, would remain on the hook to pay back the
loans.The Total Investment &
Insurance Solutions
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