The Credit Crunch Crosses the Atlantic | Newsweek The Council on Foreign Relations

The Germans Are Toxic Too
Stefan Theil 6/12/2009 12:00:00 AM
German leaders have long boasted about the stability of their financial system, and lately have been blaming the global credit crisis on American irresponsibility. German finance, they brag, is dominated by stodgy insurance companies and public banks; fueled by a high national savings rate and capital surplus; and governed by consumer-lending practices so strict that an American subprime-mortgage borrower wouldn't even qualify for an ATM card. Why, then, are German banks holding hundreds of billions worth of impaired assets? The IMF won't release country?-by-country figures, but it expects total financial--sector write-offs to be higher in Europe than in the U.S. through 2010; of those, a large part will likely come from German banks. EU Commissioner Günter Verheugen last month slammed German banks for having been "world champions in risky banking transactions." BaFin, the German financial regulator, leaked a list in April that put German banks' troubled assets at €800 billion, a figure the agency has since denied. Considering that one single bank, Munich-based Hypo Real Estate, has already racked up more than €100 billion in liquidity support (and counting), the number doesn't seem so far off.
Our Depression Obsession
Robert J. Samuelson 4/18/2009 12:00:00 AM
The Great Depression of the 1930s was the most momentous economic event of the 20th century. It was a proximate cause of World War II, having fed the Nazis' rise in Germany. It inspired a new American welfare system as a response to mass misery. Everywhere, it discredited unsupervised capitalism. Given today's economic crisis, our renewed fascination with the Depression is natural. But we ought to be cautious in stretching the parallels too far.
WORLD AFFAIRS
Europe’s Danube Blues
Stefan Theil 2/28/2009 12:00:00 AM
The parallels are eerie. In 1931, the collapse of an overleveraged, undercapitalized Vienna-based financial institution named Creditanstalt triggered a chain of worldwide bank defaults and set off the darkest days of the Great Depression. Now, once again, it's Austria's banks—including, amazingly, the successor bank to the infamous Creditanstalt—that find themselves center stage of the next act in the worldwide economic crisis.
GLOBAL INVESTOR
The Last Model Standing Is France
Holger Schmieding 1/10/2009 12:00:00 AM
The global recession takes its toll not only on those who lose their jobs, their houses or a chunk of their retirement savings. The crunch of the century is also sweeping aside many established ideas of how societies should run their economies. This impact will still be felt when the recession has long given way to a new upswing.
Storming The Fortress Of Hidden Terrorist Funds
Rana Foroohar
Even before President George W. Bush unveiled his "most wanted" list of suspected terrorist financiers, bankers around the world were rushing to make sure they weren't holding the wrong moneybags. Accounts had already been frozen in Britain and Switzerland when Germany uncovered a particularly alarming link in late September. German authorities froze an account at the Hamburg Sparkasse bank that belonged to Syrian businessman Marmoun Darkazanli, who publicly admitted that he knew all three of the suspected Sept. 11 hijackers who had lived in Hamburg. Darkazanli also admitted that he has worked for Mamdouh Mahmud Salim, who is in jail awaiting trial in the United States, where authorities believe he is a senior deputy to Osama bin Laden--and possibly his finance chief. Now Darkazanli's import-export business is suspected of being a front for bin Laden's terrorist network Al Qaeda.
Storming The Fortress
Rana Foroohar
Even before President George W. Bush unveiled his "most wanted" list of suspected terrorist financiers last week, bankers around the world were rushing to make sure they weren't holding the wrong money bags. Accounts had already been frozen in Britain and Switzerland when Germany severed a particularly alarming link last week. German authorities froze an account at the Hamburg Sparkasse bank that belonged to Syrian businessman Marmoun Darkazanli, who publicly admitted that he knew all three of the suspected Sept. 11 hijackers who had lived in Hamburg. Darkazanli also admitted that he has worked for Manduh Momoud Salim, who is in jail awaiting trial in the U.S., where authorities believe he is a senior deputy to Osama bin Laden, possibly his finance chief.