Dark Towers

How does a global financial institution, driven by greed and risky decisions, leave a trail of corruption and impact events as significant as the Holocaust and a US presidency?

1. Deutsche Bank's Risky Roots: A Friendship with Controversy

From its early days, Deutsche Bank's appetite for risk was evident. Its involvement with Henry Villard, a controversial railroad tycoon, underscored its willingness to partner with questionable characters. Villard bankrupted his companies twice while using Deutsche’s funding for personal luxuries, yet the bank maintained its relationship with him.

This tendency for risk-taking escalated during Adolf Hitler’s rise to power in 1933. Deutsche became the Nazi regime's financier, funding their atrocious activities, including the construction of Auschwitz and the Zyklon B factory. The bank even facilitated converting stolen gold, such as dental fillings from Holocaust victims, into cash.

Despite its apparent downfall after World War II, Deutsche's resilience was shocking. The British helped revive the bank, allowing its wartime director, Hermann Abs, to regain authority despite his war crimes conviction. By 1970, Deutsche had firmly established itself as Germany’s financial titan, but these early compromises would foreshadow its future behavior.

Examples

• Supported Henry Villard despite repeated bankruptcies.
• Financed the Nazi Party, including Auschwitz and Zyklon B production.
• Reinstated war criminal Hermann Abs to leadership post-WWII.

2. A Culture Shift: The Anglo-American Influence

Under Alfred Herrhausen’s leadership in 1987, Deutsche shifted toward a new era of Anglo-American banking practices. By purchasing Morgan Grenfell in 1989, Deutsche embraced investment banking and derivatives, marking a departure from its conservative German roots.

Edson Mitchell, a brash American trader, epitomized this shift. He brought a high-stakes Wall Street culture to Deutsche’s London office, emphasizing aggressive profits over traditional client service. To achieve this, he poached fellow risk-takers, including Bill Broeksmit, to build a derivatives-focused team.

This new culture brought rapid profits but also sowed seeds of discord. Deutsche traders adopted a cowboy-like mentality where risk-taking was glorified and individual gains outweighed collective ethics. This recklessness became part of the bank’s DNA, setting the stage for major scandals.

Examples

• Alfred Herrhausen purchased Morgan Grenfell for $1.5 billion.
• Edson Mitchell brought risky derivatives trading to Deutsche's focus.
• Traders began pronouncing Deutsche as "Douche Bank," reflecting their irreverent swagger.

3. Playing Dirty: Bankers Trust and Trump

Deutsche’s purchase of Bankers Trust in 1998 revealed its appetite for bold but reckless decisions. Bankers Trust had a tarnished legacy, including derivatives scams and risky unsecured loans like the $100 million loan to Donald Trump, which he never repaid.

This acquisition transformed Deutsche’s investment banking arm into a profit machine, contributing 85% of company profits within a year. However, the integration of Bankers Trust also compounded institutional rot, as traders increasingly pursued deals shunned by peer institutions.

Among those deals were continued loans to Trump, despite his record of defaults and lawsuits. While other banks considered Trump untouchable, Deutsche saw opportunity. Such behavior cemented Deutsche’s reputation as the bank willing to take on the risk no one else would.

Examples

• Purchased Bankers Trust for $10 billion amidst its public scandals.
• Gave Trump a $125 million loan after his previous defaults.
• Trump’s subsequent $300 million loan reinforced Deutsche's profit-driven priorities.

4. Greed Over Structure: The Ackermann Era

When Joe Ackermann became CEO in 2002, he centered Deutsche’s priorities on short-term profits above all else. By selling the bank's ownership in German companies to boost stock prices, Ackermann abandoned its traditionally cautious strategy.

Ackermann’s bonus systems incentivized traders to prioritize their commissions, with some receiving up to $30 million annually. Meanwhile, Deutsche channeled funds to sanctioned regimes like North Korea, Iran, and Sudan, using countersurveillance to avoid law enforcement's eye.

Internally, Deutsche’s fragmented infrastructure worsened. Inconsistent computer systems meant the bank often couldn’t track its actual exposures. But as fixing these inefficiencies would cost money, Ackermann took no action, a decision that contributed to the bank’s future implosion.

Examples

• Traders were rewarded for profits with enormous bonuses.
• Funneled funds to countries under economic sanctions.
• Left operational weaknesses in customer and trading systems unaddressed.

5. Trump's Deutsche Connection: A Symbiotic Risk

By 2005, Donald Trump’s reputation on Wall Street was toxic following multiple defaults. Yet Deutsche extended him large loans, including $640 million for a Chicago skyscraper. Deutsche overlooked his exaggerated net worth and even financed struggling ventures like Trump’s junk bond sale, which ended in bankruptcy.

Deutsche's cooperation with Trump wasn’t entirely business-minded—it also boosted the bank's profile in America. As Trump became a TV star and public figure, the association granted Deutsche notoriety in the US.

The partnership soured during the 2008 financial crisis when Trump defaulted on $334 million and sued the bank for "predatory lending." Though Deutsche cut ties at that time, it wouldn’t be the last chapter in their relationship.

Examples

• Provided $640 million for Trump’s Chicago skyscraper.
• Funded $485 million through Trump Hotel & Casinos Resorts bonds.
• Trump sued Deutsche for $3 billion during the financial crisis.

6. Surviving the Financial Crisis: Luck Over Judgment

As the US housing bubble burst in 2007, Anshu Jain prepared his division by selling risky derivatives ahead of the collapse. Though partly luck, this decision preserved Deutsche's position and allowed it to profit during the Great Recession.

Despite this near-miraculous escape, Deutsche inflated its success story by hiding billions in toxic assets. This short-term boost disguised lingering weaknesses that would resurface once regulators dug deeper.

While other banks sought government bailouts, Deutsche’s apparent resilience attracted attention. But underneath, the culture of risk and concealment further eroded its internal structure and damaged its long-term stability.

Examples

• Sold risky mortgage assets before the 2008 crisis hit.
• Concealed losses by adjusting derivative accounting.
• Profited during the recession while other banks faltered.

7. Bill Broeksmit’s Tragic Conflict

As the investigations against Deutsche mounted in 2013, Bill Broeksmit found himself entangled in the bank’s regulatory troubles. Broeksmit, who had once thrived on managing risk, was now a scapegoat for many alleged wrongdoings.

Assigned to untangle Deutsche’s mess of outdated technology and corrupt practices, Broeksmit faced pressure from regulators who blamed him for the bank’s evasions. His deteriorating mental health reflected the internal chaos at Deutsche, which failed to protect employees as the cracks widened.

Broeksmit’s death in early 2014 became a symbol of Deutsche's unchecked greed, leaving his family to discover the extent of his stress through personal letters and emails.

Examples

• Investigated for tax dodging and regulatory evasion.
• Pressured to clean up Deutsche’s outdated systems.
• Found doctors’ notes revealing anxiety linked to work pressures.

8. Jain’s Resignation and a Pyrrhic Revolution

By 2015, legal challenges forced Deutsche to confront its many misdeeds. Anshu Jain resigned under pressure, leaving the bank to face fines totaling billions and over 7,000 pending lawsuits worldwide.

Christian Sewing replaced the old guard with a vow to reinvent Deutsche as a smaller, more compliant institution. He reduced its workforce by 20% and attempted to unwind decades of malpractice. Yet public revelations, like the Laundromat scandal exposing illegal Russian money laundering, deepened its reputational damage.

Jain’s resignation marked a turning point, but it came too late to save Deutsche's image or undo the harm it caused.

Examples

• Accepted a $7 billion fine for defrauding investors.
• Launched restructuring to shrink its investment division.
• Publicized involvement in Russian oligarch money laundering.

9. A White House Connection: Deutsche and Trump Reunite

Despite Trump’s unresolved debts, Deutsche’s private bank continued lending to him during the 2010s. Rosemary Vrablic, a Deutsche banker tied closely to Trump, approved loans that helped him finance projects like Miami golf courses and the Washington, DC Trump International Hotel.

Trump used Deutsche’s relationship to counter accusations of financial isolation during his 2016 campaign. The bank’s association granted him credibility when accusations of impropriety arose during his presidency.

Trump emerged as a US president, owing $350 million to Deutsche Bank, giving rise to ethical dilemmas about foreign influence on the US executive office.

Examples

• Rosemary Vrablic secured Trump $50 million loans.
• Funded Trump hotel construction blocks from the White House.
• Trump cited Deutsche loans to counter campaign criticism.

Takeaways

1. Scrutinize financial institutions’ behaviors and question the long-term consequences of unchecked power.
2. Recognize how institutional recklessness can ripple across societies, economies, and governments.
3. Hold banks accountable by supporting transparent regulations and advocating for reform in investment banking practices.