Introduction
Deutsche Bank was once the largest bank in the world, a titan of global finance with a storied history stretching back to 1870. But behind its prestigious facade lay a sinister truth - for decades, Deutsche Bank engaged in a pattern of reckless risk-taking, unethical dealings, and outright criminality that would eventually bring it to the brink of collapse.
In "Dark Towers," journalist David Enrich uncovers the shocking story of Deutsche Bank's rise and fall, exposing how its pursuit of profit at any cost corrupted the institution and had far-reaching consequences for the global economy and even American politics. From its early days financing Nazi Germany to its more recent entanglements with Donald Trump, Russian oligarchs, and shady characters around the world, Deutsche Bank's history is a cautionary tale of unchecked greed and ambition in the world of high finance.
Drawing on extensive insider accounts and confidential documents, Enrich reveals how a change in culture and leadership in the 1990s set Deutsche Bank on a dangerous path, embracing high-risk trading and unethical practices that would ultimately lead to billions in fines, multiple scandals, and a crisis of identity for the once-proud institution. At the center of this story is Bill Broeksmit, a top Deutsche Bank executive whose suicide in 2014 became a symbol of the bank's deep-seated problems.
"Dark Towers" offers a gripping account of corporate malfeasance and its wide-ranging impacts, shedding light on how Deutsche Bank's actions contributed to the 2008 financial crisis, enabled money laundering and tax evasion on a massive scale, and even helped propel Donald Trump to the presidency. It's a tale of unchecked ambition, failed oversight, and the corrosive effects of a culture that prized short-term profits over ethics and long-term stability.
The Early Years: Risk-Taking and Unsavory Alliances
From its very founding in 1870, Deutsche Bank established a pattern of taking on greater risks than its peers and forging relationships with dubious characters in pursuit of growth and profits. This set the stage for the bank's future trajectory and willingness to push ethical boundaries.
One of Deutsche Bank's earliest questionable associations was with Henry Villard, a German immigrant turned American railroad tycoon. In 1883, the bank's co-founder Georg von Siemens traveled to Montana to witness the completion of part of the transcontinental railroad that Deutsche had helped finance. But Villard's railroad venture was already on shaky ground, and within weeks it defaulted on its loans, causing Deutsche and other investors to lose significant sums.
Despite this setback, Siemens maintained a friendly relationship with Villard. A few years later, he even sent Villard back to the U.S. as Deutsche Bank's representative to scout for new investment opportunities. For a time, this paid off as Deutsche became a major funder of U.S. railroad expansion. But true to form, Villard's new company also went bankrupt. Throughout these ups and downs, Deutsche Bank seemed willing to overlook Villard's recklessness and failures, setting a precedent for its future dealings.
As Deutsche Bank grew in the early 20th century, it continued to take on controversial clients and projects. Most infamously, when the Nazi Party rose to power in Germany in 1933, Deutsche Bank became the regime's chief financial backer. The bank was deeply complicit in the atrocities of the Holocaust, handling the conversion of gold and valuables stolen from victims into cash. It also financed the construction of the Auschwitz concentration camp and the factory that produced Zyklon B, the poison gas used in death chambers.
After World War II, Deutsche Bank's ruined Berlin headquarters fell under British control. Remarkably, the bank's wartime director Hermann Abs, who had been convicted of war crimes, was given only a light sentence. By 1956, he was back at the helm of Deutsche Bank. The British authorities were eager to see a strong German bank help revive the country's economy, so they were willing to overlook the bank's recent dark history.
For the next few decades, Deutsche Bank remained a quintessentially German institution, focused on supporting major German companies and industries. Its twin office towers in Frankfurt, nicknamed "Debit" and "Credit," became iconic symbols of West Germany's economic resurgence. But major changes were on the horizon that would dramatically alter Deutsche Bank's character and set it on a risky new path.
Cultural Shift: The Americanization of Deutsche Bank
In the late 1980s and early 1990s, Deutsche Bank's leadership began to eye the booming financial markets in London and New York with envy. They saw how American and British banks were reaping huge profits through investment banking, trading, and financial innovations like derivatives. Deutsche Bank's conservative, relationship-focused approach suddenly seemed outdated.
This shift in mindset began under CEO Alfred Herrhausen, who in 1989 orchestrated Deutsche's $1.5 billion acquisition of the British investment bank Morgan Grenfell - at the time, the largest-ever purchase of an investment bank. It was a clear signal that Deutsche wanted to play in the big leagues of global finance.
But the real transformation came in the mid-1990s, when Deutsche Bank made a concerted push to build up its presence on Wall Street and adopt an American-style banking culture. The bank brought on a team of aggressive American traders and bankers, led by the charismatic Edson Mitchell. Mitchell and his cohort, including his close friend Bill Broeksmit, were experts in the burgeoning field of derivatives trading.
This new guard of American bankers brought a very different ethos to Deutsche Bank. Gone was the staid, careful approach of the past. In its place came a swashbuckling, risk-taking mentality focused on short-term profits above all else. The goal was no longer to serve clients and support the broader economy, but to make as much money as possible through increasingly complex and opaque financial dealings.
The culture clash was stark. Many long-time Deutsche employees were taken aback by the brash, macho attitudes of their new American colleagues. There were even basic communication issues - the Americans had to be taught how to properly pronounce "Deutsche" so they wouldn't keep calling it "Douche Bank."
But the new approach seemed to be working. Under Mitchell's leadership, Deutsche Bank's London-based investment banking arm grew rapidly and began generating outsized profits. This success gave the American contingent more and more power within the organization.
The culmination of this shift came in 1998, when Deutsche Bank acquired the American bank Bankers Trust for $10 billion. This deal, championed by Edson Mitchell, gave Deutsche a major foothold on Wall Street. It also imported Bankers Trust's cowboy culture and history of pushing legal and ethical boundaries.
The numbers told the story of Deutsche Bank's transformation. Prior to the Bankers Trust merger, investment banking accounted for 29% of Deutsche's profits. Just a year later, that figure had skyrocketed to 85%. In a remarkably short time, Deutsche Bank had reinvented itself from a staid German lender to a global trading powerhouse.
But this dramatic shift came at a cost. As power consolidated in the hands of traders and investment bankers, the bank's risk controls and ethical standards began to erode. Deutsche became increasingly willing to do business with unsavory clients and engage in questionable practices, all in the name of profits.
One prime example was the bank's growing relationship with Donald Trump. By the mid-1990s, Trump had already defaulted on loans worth hundreds of millions of dollars with other banks, making him radioactive in most financial circles. But Deutsche Bank trader Mike Offit saw an opportunity. Despite Trump's checkered history, Offit extended him a $125 million loan, followed by another for $300 million.
This willingness to deal with clients and engage in practices that other banks wouldn't touch became a hallmark of Deutsche Bank's approach. It allowed them to generate huge profits in the short term, but also planted the seeds for major scandals and losses down the road.
The Americanization of Deutsche Bank represented a sea change in the institution's 130-year history. While it brought financial success in the short term, it also fundamentally altered the bank's culture and priorities in ways that would prove deeply problematic in the years to come.
The Ackermann Era: Profits Over Prudence
In 2002, Josef Ackermann became the first-ever CEO of Deutsche Bank, ushering in an era of even more aggressive profit-seeking and risk-taking. Ackermann, a Swiss banker with a penchant for numbers, was laser-focused on a single metric: return on equity. This measure of profitability became the be-all and end-all at Deutsche under his leadership.
Ackermann's first major move was to boost Deutsche's stock price by selling off the bank's ownership stakes in various German companies and distributing the proceeds to shareholders. This decision shocked many within Deutsche, who felt it left the bank more vulnerable in the event of a crisis. But for Ackermann, maximizing short-term returns trumped such concerns.
Under Ackermann's leadership, the entire culture of Deutsche Bank shifted to reflect this profits-above-all mentality. Any decision that might reduce earnings, even temporarily, was to be avoided. The compensation system was overhauled to reward traders and bankers who brought in the biggest profits, with some receiving annual bonuses of $30 million or more.
This obsession with profits led Deutsche down some very dark roads. The bank began actively seeking out clients and deals that other financial institutions wouldn't touch due to legal or ethical concerns. Some examples of Deutsche's questionable activities during this period include:
Funneling money to regimes under international sanctions, including Syria, Iran, North Korea, and Sudan. Deutsche employees were even trained in counter-surveillance techniques to avoid detection by law enforcement.
Cultivating close ties with Russian oligarchs and state-owned entities with links to Russian intelligence services. In 2006, Deutsche acquired a Russian stock trading business whose clients included numerous law-skirting oligarchs.
Continuing to extend massive loans to Donald Trump, despite his history of defaults and increasingly erratic behavior. In 2005, Deutsche lent Trump $640 million to build a luxury tower in Chicago - even though their own accountants had found Trump's net worth to be far lower than he claimed.
Engaging in various tax evasion and money laundering schemes that skirted or outright broke laws in multiple countries.
While these high-risk, legally dubious activities generated enormous short-term profits, they also exposed Deutsche to major regulatory and reputational risks. But under Ackermann's leadership, such long-term concerns were given little weight compared to the allure of immediate financial gains.
At the same time that Deutsche was pushing ethical and legal boundaries in pursuit of profits, the bank was neglecting critical infrastructure and risk management systems. Ackermann was reluctant to invest in updating the bank's fragmented and outdated computer systems, as such expenses would eat into profits. This left Deutsche unable to properly track or understand the full scope of its activities and risk exposures.
One Deutsche executive likened trying to fix the bank's IT systems to "changing an engine mid-flight." But even if it had been easier, Ackermann likely would have balked at the cost. This neglect of core infrastructure would come back to haunt Deutsche in the years ahead.
The Ackermann era at Deutsche Bank was characterized by a relentless focus on short-term profits at the expense of prudent risk management, ethical considerations, and long-term stability. While it produced eye-popping earnings for a time, it also set the stage for the crises and scandals that would engulf the bank in subsequent years.
Dancing on the Edge: Deutsche Bank and the Financial Crisis
As the global financial system began to show signs of strain in 2007 and 2008, Deutsche Bank's years of reckless risk-taking left it in an extremely precarious position. The bank had leveraged itself to an unprecedented degree, with a ratio of borrowed money to capital reaching 50 to 1 - far higher than the industry norm of around 20 to 1.
This level of leverage was sustainable only as long as asset prices kept rising and easy credit remained available. But as the U.S. housing market began to collapse and credit markets seized up, Deutsche Bank found itself teetering on the brink of disaster.
In a move that likely saved the bank from collapse, Deutsche's head of investment banking Anshu Jain instructed his teams to rapidly sell off their riskiest positions in the U.S. housing market in late 2007. This allowed Deutsche to avoid the worst of the immediate fallout when the crisis hit in full force in 2008.
However, the bank was far from out of the woods. Deutsche still held vast quantities of toxic assets and derivatives on its books. Rather than honestly accounting for these losses, the bank's traders engaged in various accounting tricks to hide billions in losses and make it appear that Deutsche was weathering the storm better than its peers.
This subterfuge allowed Deutsche to claim it was the only major bank to turn a profit during the depths of the financial crisis. But it was a hollow and short-lived victory. As regulators and investors began to wise up to the true state of Deutsche's finances in the years following the crisis, the bank would face a reckoning.
The strains of the financial crisis and its aftermath took a particularly heavy toll on Bill Broeksmit, the veteran banker who had helped build Deutsche's derivatives business in the 1990s. Broeksmit had come out of retirement in 2008 at Jain's request to help the bank navigate the crisis. But he found himself increasingly alienated by the bank's culture and practices.
Broeksmit tried to rein in some of Deutsche's riskiest and most unethical activities, but was often ignored or even mocked for his concerns. In one instance, he challenged a group of brash young traders in New York over their excessively risky trades, only to become a figure of ridicule among the trading floor. Those same trades would later cost Deutsche over $500 million in losses.
As investigations into Deutsche's conduct during and after the financial crisis ramped up, Broeksmit found himself in an impossible position. He was tasked with cleaning up the bank's messes, but also became a target of regulatory scrutiny himself. The stress and moral conflict took a devastating toll on his mental health.
In January 2014, Bill Broeksmit took his own life, hanging himself with his dog's leash at his London home. He left behind suicide notes for his family and for Anshu Jain. Broeksmit's death sent shockwaves through Deutsche Bank and became a potent symbol of how the bank's culture of greed and recklessness was destroying lives.
The financial crisis and its aftermath exposed the rot at the core of Deutsche Bank. While clever maneuvering and deception allowed it to survive the immediate crisis, the bank emerged with its reputation in tatters and facing a mountain of legal and regulatory challenges. The death of Bill Broeksmit was a tragic illustration of the human cost of Deutsche's pursuit of profits at any price.
Reckoning and Restructuring: Deutsche Bank's Fall from Grace
In the years following the financial crisis, Deutsche Bank's chickens came home to roost. The bank faced an onslaught of investigations, lawsuits, and massive fines for its past misdeeds. By 2015, there were over 7,000 separate legal actions pending against Deutsche around the world.
The scale of Deutsche's wrongdoing was staggering. Investigations revealed that the bank had:
- Manipulated key interest rate benchmarks like LIBOR
- Engaged in tax evasion schemes that defrauded governments out of billions
- Violated international sanctions against countries like Iran and Syria
- Enabled money laundering for Russian oligarchs and other shady characters
- Defrauded investors through its mortgage-backed securities business
As the extent of these misdeeds came to light, Deutsche was hit with a series of record-breaking fines. In 2015, it paid $2.5 billion to settle charges of interest rate manipulation. In 2016, the U.S. Department of Justice levied a $7.2 billion penalty against Deutsche for its role in the mortgage crisis - the largest fine ever imposed on a bank at that time.
These massive fines, combined with tighter regulations and a loss of investor confidence, sent Deutsche Bank into a tailspin. Its stock price plummeted to all-time lows. Thousands of employees were laid off as the bank struggled to cut costs and restructure its operations.
The fall from grace was stark. In 2007, Deutsche had briefly been the largest bank in the world, with $2 trillion in assets. Now it was fighting for survival, its reputation in tatters and its future uncertain.
This period of reckoning led to major changes in Deutsche's leadership and strategy. In 2015, co-CEOs Anshu Jain and Jürgen Fitschen were forced to resign amid mounting legal troubles and poor financial performance. They were replaced by John Cryan, a British banker brought in to clean up the mess.
Cryan attempted to reform Deutsche's culture and scale back its riskiest activities. But the damage done over the previous decades proved difficult to undo. Despite his efforts, Deutsche continued to struggle with legal issues, low profitability, and a loss of investor confidence.
In 2018, the Deutsche Bank board decided more drastic action was needed. They appointed a new CEO, Christian Sewing, a longtime Deutsche employee who had started at the bank as a teenage apprentice. Sewing represented a return to Deutsche's German roots and a repudiation of the aggressive Anglo-American investment banking culture that had taken hold since the 1990s.
Sewing unveiled a radical restructuring plan aimed at refocusing Deutsche on its core strengths in corporate and retail banking, particularly in Germany and Europe. The plan called for:
- Dramatically shrinking the investment banking division, including shutting down Deutsche's global equities business
- Cutting 18,000 jobs, about 20% of the bank's total workforce
- Creating a "bad bank" to house and wind down €74 billion in toxic assets
- Suspending dividend payments for two years to shore up capital
This restructuring represented a stark admission that Deutsche's decades-long attempt to become a global investment banking powerhouse had failed. The bank was essentially retreating to its roots as a more traditional European commercial bank.
The restructuring process has been painful and is still ongoing. Deutsche continues to grapple with low profitability, legacy legal issues, and the challenge of reforming its internal culture. But many observers see it as a necessary step if Deutsche Bank is to survive and eventually regain its footing as a stable, reputable financial institution.
The story of Deutsche Bank's fall from grace serves as a cautionary tale about the dangers of unchecked ambition and a culture that prioritizes short-term profits over ethics and long-term stability. It also highlights the immense difficulty of reforming a large, complex organization once toxic practices have become deeply ingrained.
The Trump Factor: Deutsche Bank's Fateful Relationship
One of the most consequential and controversial aspects of Deutsche Bank's recent history has been its long-standing relationship with Donald Trump. This association, which spanned decades and involved billions in loans, not only exemplified Deutsche's appetite for risk but also had far-reaching implications for American politics.
Deutsche Bank's entanglement with Trump began in the 1990s, at a time when most major banks refused to do business with the brash real estate developer due to his history of defaults and bankruptcies. But Deutsche, eager to make a name for itself in New York real estate, was willing to take the risk.
Over the years, Deutsche extended Trump numerous loans for various projects, often on very favorable terms. Even when Trump defaulted on payments or sued the bank, Deutsche kept coming back for more. Some key moments in this relationship include:
In 2005, Deutsche lent Trump $640 million to build his Chicago tower, even though their own accountants found his net worth to be far lower than he claimed.
In 2008, Trump defaulted on a $334 million loan payment and then sued Deutsche for $3 billion, claiming the financial crisis was an "act of God" that nullified his obligations. Despite this, Deutsche's private banking division would soon resume lending to Trump.
Between 2012 and 2015, Deutsche extended over $300 million in loans to Trump to finance his Doral golf resort in Florida and his Washington, D.C. hotel project.
This willingness to lend to Trump when other banks wouldn't proved crucial to his business survival and his cultivation of an image as a successful businessman. It also had profound political implications.
When Trump launched his presidential campaign in 2015, his association with Deutsche Bank became a key talking point to counter claims that he was a pariah in the financial world. He repeatedly pointed to his relationship with the "very powerful" Deutsche Bank as evidence of his business acumen and creditworthiness.
Moreover, the hundreds of millions in Deutsche Bank loans allowed Trump to self-fund much of his unconventional presidential campaign. Without this line of credit, it's questionable whether Trump would have had the resources to mount a serious run for the presidency.
After Trump's surprise victory in 2016, Deutsche Bank found itself in an unprecedented situation: their client was now the President of the United States, and he owed the bank hundreds of millions of dollars. This raised serious concerns about conflicts of interest and the potential for the Trump administration to show favoritism to Deutsche Bank in regulatory matters.
The Trump-Deutsche relationship also attracted intense scrutiny from lawmakers and the media. Questions were raised about whether Deutsche Bank had any compromising financial information about Trump, and whether the bank had facilitated any questionable transactions involving Trump or his associates.
These concerns were amplified by Deutsche Bank's known involvement in Russian money laundering schemes. Given Trump's murky ties to Russia, some speculated that Deutsche might have been a conduit for Russian funds to reach Trump or his businesses.
As investigations into Trump's finances intensified, Deutsche Bank's handling of Trump's accounts and tax returns became a major focus. The bank found itself caught between congressional subpoenas for Trump's financial records and the Trump administration's legal efforts to block their release.
The saga of Deutsche Bank and Donald Trump encapsulates many of the themes that defined the bank's troubles in recent decades: a willingness to take on risky clients, a prioritization of short-term profits over due diligence, and a failure to foresee the long-term consequences of its actions.
It also illustrates how the decisions of a single bank can have far-reaching effects beyond the financial world. By continuing to lend to Trump when others wouldn't, Deutsche Bank played an inadvertent but significant role in shaping the course of American politics and history.
As Deutsche Bank struggles to reform itself and move past its troubled history, its entanglement with Donald Trump remains a stark reminder of the real-world impact that a bank's risk-taking and ethical lapses can have.
Conclusion: Lessons from Deutsche Bank's Downfall
The story of Deutsche Bank's rise and fall offers a number of important lessons for the financial industry and society at large:
Culture matters: Deutsche Bank's shift from a conservative German lender to a high-flying global investment bank brought with it a culture of excessive risk-taking and ethical corner-cutting. This culture, once established, proved incredibly difficult to change even when its negative consequences became apparent.
Short-term thinking is dangerous: The relentless focus on quarterly profits and return on equity under leaders like Josef Ackermann led Deutsche to neglect crucial long-term considerations like risk management, regulatory compliance, and reputational risk.
Size and complexity bring risks: As Deutsche Bank grew into a global behemoth, it became increasingly difficult for executives and regulators to understand and control all of its activities. This complexity created opportunities for malfeasance and made it harder to address problems when they arose.
Regulatory capture is a real threat: Deutsche Bank's ability to continue operating despite repeated scandals and rule violations highlights the dangers of financial institutions becoming "too big to fail" or too influential with regulators and politicians.
Individual incentives shape behavior: Deutsche's compensation systems, which richly rewarded short-term profits without regard for long-term risks, encouraged traders and executives to prioritize their own bonuses over the bank's stability and reputation.
Ethical lapses have real-world consequences: From its financing of the Nazi regime to its more recent entanglements with Donald Trump and Russian oligarchs, Deutsche Bank's willingness to do business with unsavory clients had impacts far beyond the financial realm.
Reform is difficult but necessary: Deutsche Bank's ongoing struggles to restructure and rehabilitate its image demonstrate how challenging it can be for a large institution to change course once problematic practices become entrenched.
As Deutsche Bank continues its efforts to reinvent itself as a smaller, more focused, and hopefully more ethical institution, the broader financial industry would do well to heed these lessons. The spectacular rise and fall of what was once the world's largest bank serves as a stark warning about the dangers of unchecked ambition and the importance of maintaining a strong ethical compass in the high-stakes world of global finance.
Ultimately, the story of Deutsche Bank is a human one. It's a tale of individual and collective choices, of ambition and hubris, of the intoxicating allure of wealth and power. From Georg von Siemens to Edson Mitchell to Josef Ackermann, the key figures in Deutsche's history were not cartoon villains, but complex individuals operating within a system that often rewarded the wrong behaviors.
Perhaps the most poignant embodiment of Deutsche Bank's tragedy is Bill Broeksmit, the executive whose suicide became a symbol of the human toll of the bank's cutthroat culture. Broeksmit, by all accounts a thoughtful and ethical man, found himself caught between his loyalty to the institution he had helped build and his growing horror at what it had become. His death serves as a stark reminder that behind the abstract numbers of profits and losses are real people whose lives can be profoundly affected by the decisions made in corporate boardrooms.
As the global financial system continues to evolve and face new challenges, the cautionary tale of Deutsche Bank will remain relevant. It reminds us that financial institutions wield enormous power in our society, and with that power comes great responsibility. It underscores the crucial importance of strong regulation, ethical leadership, and a corporate culture that values long-term stability and integrity over short-term gains.
The story of Deutsche Bank is not yet over. Its efforts at reform and redemption will likely continue for years to come. But regardless of its future trajectory, the bank's troubled history will stand as a powerful case study in the perils of unchecked greed and the vital importance of maintaining ethical standards in the face of temptation. It is a story that deserves to be remembered, studied, and learned from by anyone concerned with the health of our financial systems and the broader impact of corporate behavior on society.