The Pol Pot of Banking

There\’s a certain truth to this. If we\’re to copy bits of the German economy then we should probably be trying to copy the bits that work, not the bits that we like:

KfW actually makes a somewhat odd role model. It is chaired by Cable’s equivalent in the German government, its funding coming almost entirely from state-guaranteed bonds, which makes it essentially just another conduit for government spending.

Competent it is not. Just hours before the Lehman collapse, when everyone was scrambling to get their money out, KfW negligently wired $426 million to the failing investment bank, prompting derision as “Germany’s dumbest bank”.

You can see the attraction for a politician of such a model. The important question though is what is the attraction for us?

That yet more of our money, yet more of the economy, of the investment in it, the financing of it, passes into the hands of the poltroons who gain political power does not seem to offer much of a benefit to us.

To the poltroons, sure.

2 thoughts on “The Pol Pot of Banking”

  1. In fairness to KfW, I remember that Friday quite well (working on the trading floor of a small Metals trading business).

    We were contacted by Lehman’s staff at several times throughout the day demanding immediate payment of various sums to which we were liable, but which were not yet due.

    Payment orders had been prepared, but not yet signed as the MD was out of the office and wouldn’t return until Monday morning.

    It depends upon the specific circumstances, but if Lehman’s were owed the money by KfW and payment was due then they might have been doing nothing more than their legal obligation by paying the bill.

    If it was an investment of course, then that would have been pretty stupid.

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