Roland DürreThursday November 12th, 2009
I hear in the news that the “Bayern-LB” budget again shows a significant loss. Allegedly, a deficit of 1.5 billion Euros for the current year has been written down. It can be surmised that the situation of the other “saved” banks is similar.
In the face of the current financial crisis, I would have wished the bankrupt banks to be offered “controlled insolvency”. That was what an outsider demanded, but people boldly said that they were “sure” banks had to be saved because they were “system relevant.
Incidentally, my reasoning had been a good one:
The “normal costs” of “BayernLB”, according to my calculations, had been between 1 and 2 billion Euros. “Normal costs” in my way of thinking are wages, office rent, administration, etc., i.e. the non-business-specific costs.
My concept was based on the fact that “BayernLB” was in no position to have a turnout in that league if doing business in a respectable way. Let alone pay their old debts. That is why it was my wish to let them into “controlled insolvency”. A federal guarantee for “system relevant” debts might have been included in that model.
Now, the normal costs are not balanced by profits from business. Instead, the opposite side of the balance sheet shows again debt (if a little less). Remedial action is not possible, because getting rid of the employees alone would cost several times more than continuing to pay them.
As before, it seems like the only solution to the bank dilemma is insolvency or “insolvency-like procedures”.
It is an old business principle that you should not throw good money after bad.
(Translated by EG)