Amid growing outrage over the planned bailout of a subsidiary and a mistaken money transfer, pressure is mounting on Germany's KfW development bank. Amid the damaging fallout from the US banking crisis, German state development bank KfW has come under increased criticism from several of its own supervisory board members. One lawmaker has called for the "total reform" of KfW in the wake of a major payment error, while another has raised doubts about the costly bailout of crippled subsidiary IKB. Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift: Could the IKB bailout be less than certain? Late Thursday, Sept. 18, the KfW board is slated to meet in Berlin for a formal vote to approve the sale of IKB Deutsche Industriebank, a subsidiary of KfW that was hit hard in by subprime mortgage exposure in the US, to US financial investor Lone Sta
Amid the damaging fallout from the US banking crisis, German state development bank KfW has come under increased criticism from several of its own supervisory board members.
One lawmaker has called for the "total reform" of KfW in the wake of a major payment error, while another has raised doubts about the costly bailout of crippled subsidiary IKB.
Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift: Could the IKB bailout be less than certain?
Late Thursday, Sept. 18, the KfW board is slated to meet in Berlin for a formal vote to approve the sale of IKB Deutsche Industriebank, a subsidiary of KfW that was hit hard in by subprime mortgage exposure in the US, to US financial investor Lone Sta
Hundreds of billions of euros from a German government-owned bank went down the drain with Lehman Brothers on Monday after a strange deal that has left many people scratching their heads. Why would a German bank transfer €300 billion to an American Wall Street firm after it filed for bankruptcy? German Finance Minister Peer Steinbrück says he's as baffled as anyone. The German Finance Ministry declared itself shocked -- shocked! -- on Wednesday at the news that a state lending bank, KfW, had transferred €300 million ($426 million) to Lehman Brothers in New York on Monday, just after the investment bank collapsed. "What we have had to read today is astonishing and exasperating," Finance Ministry spokesman Torsten Albig told reporters. "We expect a swift explanation of such a technical failure, which is inexplicable to us." The trouble is, KfW is overseen by the Finance Ministry, among other elements of the German government, and the country's finance minister, Peer Steinbrück, holds ultimate responsibility for the bank's health. Ratings agency S&P said KfW's sudden exposure to such a loss would not hurt the bank's credit; but KfW was already burdened by the collapse of another German bank, IKB, in the wake of the subprime crisis last winter. KfW was IKB's largest shareholder, and it oversaw a deal -- on behalf of the public -- to sell the bank to American investors at the firesale price of €100 million. The bargain basement sale, however, came only after taxpayers were required to pay billions to bail IKB out.
Hundreds of billions of euros from a German government-owned bank went down the drain with Lehman Brothers on Monday after a strange deal that has left many people scratching their heads. Why would a German bank transfer €300 billion to an American Wall Street firm after it filed for bankruptcy?
German Finance Minister Peer Steinbrück says he's as baffled as anyone. The German Finance Ministry declared itself shocked -- shocked! -- on Wednesday at the news that a state lending bank, KfW, had transferred €300 million ($426 million) to Lehman Brothers in New York on Monday, just after the investment bank collapsed.
"What we have had to read today is astonishing and exasperating," Finance Ministry spokesman Torsten Albig told reporters. "We expect a swift explanation of such a technical failure, which is inexplicable to us."
The trouble is, KfW is overseen by the Finance Ministry, among other elements of the German government, and the country's finance minister, Peer Steinbrück, holds ultimate responsibility for the bank's health. Ratings agency S&P said KfW's sudden exposure to such a loss would not hurt the bank's credit; but KfW was already burdened by the collapse of another German bank, IKB, in the wake of the subprime crisis last winter. KfW was IKB's largest shareholder, and it oversaw a deal -- on behalf of the public -- to sell the bank to American investors at the firesale price of €100 million. The bargain basement sale, however, came only after taxpayers were required to pay billions to bail IKB out.
