Deutsche Bank is issuing shares and beefing up its Tier One Capital. The Qatari Royal Family is picking up a big piece. Everyone else is getting in by way of rights issue. The underwriters have ensured the deal will float as they say.
Deutsche bank must be spitting nails but they did it to disabuse all the talk of financial inadequacy. Nothing like another $11 Billion Euros’s where it’s needed most. The quid pro quo will be that all the German financial institutions will support each other when needed and keep Tier One Capital strong.
The blow back will be to other institutions. Notably to the large American Banks which are too large to fail. these aircraft carriers of the US and global economy must be kept afloat. There will be pressure for US Banks to top up.
Obama is mistrustful of Wall Street and understands the more capital in a Bank the less systemic risk the American tax payer is on the hook for. Jamie Dimon comments aside watch for sudden announcements of rights offerings and dilution.
The Germans have a saying. “If it does not kill you it makes you stronger”
George Gutowski writes from a caveat emptor perspective.