“Would you mind if we take a picture?” he asked my friend, after processing his passport application.
“No problem,” said my friend.
“Can we do it in front of the flag?” asked the official.
My friend stared at the German flag. “What’s this for?” he asked.
“Our website,” said the German official, then added that the government hoped to post the photo with a sign that read: This man is the descendant of Holocaust survivors and he has decided to return to Germany.
COMMERZBANK WAS THE first private bank that the German government had to rescue during the financial crisis, with an injection of $25 billion, but that’s not why it had caught my attention. I’d been walking around Frankfurt one night with a German financier when I noticed the Commerzbank building on the skyline. There’s a law in Germany prohibiting buildings higher than twenty stories, but Frankfurt allows exceptions. The Commerzbank Tower is fifty-three stories high and unusually shaped: it resembles a giant throne. The top of the building, the arms of the throne, are more decorative than useful. The interesting thing, said the German financier, who visited often, is the glass room at the top, from which one looks down over Frankfurt. It is a men’s toilet. Commerzbank executives had taken him there to show him how, in full view of the world below, he could shit on Deutsche Bank.
The Commerzbank chairman, Klaus-Peter Müller, actually works in Berlin, inside another very German kind of place. His office is attached to the side of the Brandenburg Gate. The Berlin Wall once ran, roughly speaking, right through the middle of it. One side of his building was once a field of fire for East German border guards, the other a backdrop for Ronald Reagan’s famous speech. (“Mr. Gorbachev, open this gate. Mr. Gorbachev, tear down this wall!”) From looking at it you would never guess any of this. “After the wall came down we were offered the chance to buy it back,” says Müller. “This building had been ours before the war. But the condition was that we had to put everything back exactly the way it was. It all had to be hand-fabricated.” He points out the seemingly antique brass doorknobs and the seemingly antique windows. Across Germany, in the past twenty years or so, town centers completely destroyed by bombs in World War II have been restored, stone by stone. The German government has agreed to pay some huge sum of money to rebuild the Berliner Schloss, the old Royal Palace that was leveled in the 1950s by the East German authorities, so that it will look exactly as it does in prewar photographs. If the trend continues, it will one day appear as if nothing terrible had ever happened in Germany, when everything terrible happened in it. “Do not ask me what it cost,” the bank chairman says, and laughs.
He then offers me the same survey of German banking that I will hear from half a dozen others. German banks are not, like American banks, mainly private enterprises. Most are either explicitly state-backed or small savings co-ops. Commerzbank, Dresdner Bank, and Deutsche Bank, all founded in the 1870s, are the only three big private German banks. In 2009 Commerzbank bought Dresdner. Both turned out to be loaded with toxic assets, and so the merged bank required a government bailout. “We are not a proprietary trading nation,” says Müller, getting pretty quickly to the nub of Germany’s banking problems. German banking was never meant to be a high-stakes affair. Banking, done in the proper German fashion, is less a free enterprise than a utility. “Why should you pay twenty million to a thirty-two-year-old trader?” Müller asks himself. “He uses the office space, the IT, the business card with a first-class name on it. If I take the business card away from that guy he would probably sell hot dogs.” This man is the German equivalent of the head of Bank of America or Citigroup. And he is actively hostile to the idea that bankers should make huge sums of money.
In the bargain, he tells me why the current financial crisis has so unsettled the German banker’s view of the financial universe. In the early 1970s, after he started at Commerzbank, the bank opened the first New York branch of any German bank, and he went to work in it. He mists up a bit when he tells stories about the Americans he did business with back then: in one story, an American investment banker who had inadvertently shut him out of a deal hunts him down and hands him an envelope with seventy-five grand in it, because he hadn’t meant for the German bank to get stiffed. “You have to understand,” he says emphatically, “this is where I get my view of Americans.” In the past few years, he adds, that view had changed. I sense a feeling of loss.
“How much money did you lose in subprime?” I ask.
“I don’t want to tell you,” he says.
He laughs and then continues. “For forty years we didn’t lose a penny on anything with a triple-A rating,” he says. “We stopped building the portfolio in subprime in 2006. I had the idea that there was something wrong with your market. I did not have the idea that your market would completely collapse.” He pauses. “It has told something to me. I was in the belief that the best supervised of all banking systems was in New York. To me the Fed and the SEC were second to none. I did not believe that there would be e-mail traffic between investment bankers saying that they were selling . . .” He pauses again, and decides he shouldn’t say “shit.” “Dirt,” he says. “This is by far my biggest professional disappointment. I was in a much too positive way U.S.-biased. I had a set of beliefs about U.S. values.”
The global financial system may exist to bring borrowers and lenders together, but, over the past few decades, it has become something else, too: a tool for maximizing the number of encounters between the strong and the weak, so that the one might exploit the other. Extremely smart traders inside Wall Street investment banks devise deeply unfair, diabolically complicated bets, and then send their sales forces out to scour the world for some idiot who will take the other side of those bets. During the boom years a wildly disproportionate number of those idiots were in Germany. As a reporter for Bloomberg News in Frankfurt named Aaron Kirchfeld put it to me, “You’d talk to a New York investment banker and they’d say, ‘No one is going to buy this crap. Oh. Wait. The Landesbanks will!’” When Morgan Stanley designed extremely complicated credit default swaps so they were all but certain to fail, so that their own proprietary traders could bet against them, the buyer was German. When Goldman Sachs helped the New York hedge fund manager John Paulson design a bond to bet against—a bond that Paulson hoped would fail—the buyer on the other side was a German bank called IKB. IKB, along with another famous fool at the Wall Street poker table called WestLB, was based in Düsseldorf—which is why, when you asked a smart Wall Street subprime mortgage bond trader circa June 2007 who was still buying his crap, he could say, simply, “Stupid Germans in Düsseldorf.”
THE DRIVE FROM Berlin to Düsseldorf takes longer than it should. For long stretches the highway is choked with cars and trucks. A German traffic jam is a peculiar sight: no one honks, no one switches lanes searching for some small, illusory advantage, all trucks remain in the right-hand lane, where they are required to be. The spectacle of sparkling BMWs and Mercedes-Benzes in the left lane and immaculate trucks in a neat row in the right lane is almost a pleasure to watch. Because everyone in the jam obeys the rules, and believes that everyone else will obey them, too, the cars and trucks move as fast as they can, given the circumstances. But the pretty young German woman behind the wheel of our car doesn’t take any pleasure in it. Charlotte huffs and groans at the sight of brake lights stretching into the distance. “It’s what I hate more than anything in the world,” she says apologetically. “I hate being stuck in traffic.”