RAOUL PAL: Deutsche Bank isn't Lehman Brothers - but there's a bigger issue at stake
The German bank is facing a $14 billion fine from US authorities, hedge funds are putting short bets on its stock (though two big funds have eased off), and the bank announced further layoffs this week.
Some commenters have been comparing Deutsche's issues to the fall of investment bank Lehman Brothers, which filed for bankruptcy in 2008.
Raoul Pal, a macro investor who previously managed money for GLG Partners, one of the world's biggest hedge fund groups, doesn't think it's quite that bad. Rather, the Deutsche Bank example speaks to larger issues in the financial industry.
Here's an excerpt from an interview with his video platform, Real Vision TV (emphasis is added):
"Is it a Lehman Brothers crisis? I think, somebody interestingly put it to me, it's like, it can't be, because the problem with Lehman Brothers was Dick Fuld's arrogance of reaching a deal with somebody. In this situation, I don't think anybody's going to get in that situation. Nobody's playing the kind of Wall Street, puff-chested, master of the universe. The problem we've got here is, nobody knows what the outcomes are and who can do anything about it."
Pal added his belief that banks are going to shift from private to state ownership:
"So will they find some sort of fudged way of doing it again? Yeah. Will they find some way of maybe a third party, supernational to hold the stakes in the banks?
But basically, in the end, whatever the outcome is, there may not be a big bang. But the ownership of these banks is going to change from private hands to state hands, in one way, shape, or form. And basically, it's the nationalization of the banking system, which is the end of the Trail of Definancialization of the global economy that we're seeing.
We're seeing it everywhere. The whole finance economy is shrinking. And it had to shrink - got too big as a percentage of world GDP. And it's going down. And I think somehow, this will all get amalgamated into either government or third-party balance sheets, so the ECB can fund it. You know, it's a mess. And it's still got a long way to play out, I think."