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Where’s the money gone?

The financial crisis has huge assets destroyed. But billions have not gone away - they are being redistributed. A search for traces of American construction companies, banking executives and Chinese investors

On the afternoon of 31 October jump in the second floor of a yellow-painted villa in downtown Frankfurt on the fax machine. Five pages long slide from the slot on the first page, the letterhead of Commerz Bank, the last on the signature of its chairman Martin Blessing, somewhere in between the one crucial number: 8.2 billion euros. To ask so much money the bank Commerzbank, the Federal Republic of Germany, represented by the “Soffin,” the newly established special funds to stabilize the financial markets. Meanwhile, 21 employees have only a few days earlier in the yellow villa its related offices. The crisis has its focal point.

On the morning of the 17th November at 9:30 clock uses in a conference room near the English Garden in Munich, the CEO of Hypo Real Estate, Axel Wieandt, the telephone. He added, bank analysts around the world. One hour and two minutes Wieandt reported from inside the bank. The summary: 3.05 billion euro loss in the third quarter of 2008.

On the evening of the 19th November is Josef Ackermann, the head of Deutsche Bank, on the outskirts of Berlin’s government district in the hall of the Catholic Academy in a light blue chair before 300 people. He says: “This is the first global crisis at all, and we are still in the midst of the crisis.”
Risky papers

* MBS
* Collateral Debt Obligations
* Credit default swaps

MBS

Mortgage-backed securities (MBS): Fixed income securities, which by the value of a mortgage coverage. The interest that is paid to the MBS will be financed with interest that a homeowner to pay his mortgage.
Collateral Debt Obligations

Collateral Debt Obligations: For this product banks were risky, poor sub-prime mortgages in the MBS, divided them into packages and let rating agencies the risk of these packages redefine. The agencies have provided some surprisingly class evaluations.
Credit default swaps

Credit default swaps: Are insurance MBS - in the event that mortgage is not repaid. The U.S. insurer AIG is because of the sudden they become due quantity swaps have become insolvent.

How long will it last? According to estimates by the Bank of England have the financial institutions in the world now 2.8 trillion dollars. These are 2800 billion, which is the equivalent of 140 million VW Golf. The money was “burned,” “lost”, “disappeared”, it says. And the money goes further destruction. How big is the loss will be even? How many bankruptcies will follow, as many banks and corporations, governments will still need to save?

Nobody knows. Perhaps the most interesting question but it is already answered.

Where’s the money gone?

In the desert of Nevada, the millions to become marble

This question is at the beginning of a long journey to the American desert, into a Frankfurt bank tower and a Chinese fund manager will lead. The Italian Prime Minister and media entrepreneur Silvio Berlusconi will appear on and in the end a German pensioner who had the good fortune in the financial crisis, not a single euro to lose. Again, this woman is an important part of the crisis, because it helps with their money, in the weeks to save the world. Although they do not like this idea.

In search of the money will show that it rarely permanently disappear and even rarer burns. But that is quite often the changing hands.

So where is the money? Where are for 2.8 trillion dollars?

There are many people in Germany, where this question could be: economists, asset managers, stock market gurus. A man, but seems better than most suited to answer. Because he apparently is one of the few who really understand what is going on in the past years in the business world has happened.

The man is Max Otte. Especially coming from a speech in Frankfurt, tomorrow he flies to Vienna for a television appearance. In between, he has an afternoon free. Otte is currently in high demand.

He locks his apartment in the city of Cologne on, the jacket, which loosens the tie. He is 44 years old, a small, corpulent man two years ago, he was still an unknown business professor at the University of Applied Sciences in Worms. If he then turns on the TV, he occasionally other economic professors who do not have technical colleges, but taught at universities. Almost always they said that the boom continue, stock prices would rise further. Otte had a different opinion. He believed the world are heading for an economic catastrophe. So he wrote a book in which he falls in share prices, the collapse of banks and the possible bankruptcy of the American car company General Motors predicted. “If I understand the characters, which leaves us with the world economy, then it must crash - and with a mighty force,” said Otte.

He gave the book entitled The crash comes. It appeared in the spring of 2006, sold well, but was not a bestseller. Then came the crash. Since Otte is the man who knew everything. His book has so far sold 200,000-times. Soon, the Chinese edition.

Where the money has remained? Otte meditates. Then he says: “If you want to know where the money is gone, you must first go to America, in the suburbs of large cities. You need to see the houses. ”

For example, this: Mantua Avenue number 70 in the town of Henderson in the state of Nevada.

About the villa is a touch of Tuscany. Round of clay roof tiles, wooden shutters, a covered porch, small pine trees in the front garden. Looking into the distance, you can see the casinos of Las Vegas in the sun flicker. Looking to the side, you can still see a villa and also another and another.

Inspirada is the settlement. Hundreds finished, unoccupied houses are here, hundreds of shells at dozens of streets, Via Delle Arti Street hot or Palazzo Reale Avenue. Streets, a little bit of Italy to America and bring it all into the desert, because it was exactly this piece of land before the U.S. real estate company Toll Brothers began to shed money here: a pile of sand with a few cactuses that .

Ten years of the boom - nearly everyone got a loan

550 million U.S. dollars in the area on the outskirts of Las Vegas flowed, 790 acres, as big as football fields 1400. Once again so much it has cost, to develop it; paths, roads and sewers them.

A strong geschminkte sales lady pushes the door of the Tuscany House number 70 on. For ten years she worked for Toll Brothers. Ten years in which she and Las Vegas went well. The saleswoman shows on the marble floor: $ 15,000. The granite work surface: 1300 dollars. The staircase of cherry wood: $ 3500. The Jacuzzi in the bathroom: $ 1250.

“My name is Bob Toll.” The voice comes from a TV in the living room. On the large flat screen runs in a continuous loop video of a sale Toll Brothers. Satisfied customers tell us how happy they are in their dream home.

It no longer listens to them.

$ 600,000 Toll Brothers wanted for the house, says the saleswoman. But there is room for negotiation, it would only cost hereinholen. Still no buyers. Not in this street and in no other. The money from the Toll Brothers is in the houses fixed.

Here, in a ghost town on the outskirts of Las Vegas, is the first answer to the question of the money to be found: 22,000 houses are alone in the state of Nevada for sale. Across America is 4.67 million houses and condominiums empty. Nobody wants them. $ 212,000 on average, they have tasted. That makes 990 billion, festgemauert in walls and floors.

Ten years of construction companies in America built new settlements with hundreds of thousands of so-called McMansions - homes with five bedrooms, staircases, chandeliers, porticos. For ten years they made good business. For ten years, Americans bought everything that had four walls.

The money they got from the banks.

To do this, you should know: borrowing and lending is the basis of any financial system, the oldest of the credit business idea of capitalism. A person borrows from Bank B, an amount of money, the A with a premium refund, the interest rate. A good deal for both parties. The bank gets the interest and make a nice profit. A person can deal with the borrowed money to buy something that otherwise would be unaffordable, such as a house. Provided that A can afford the loan.

How can an American crisis affected the entire world?

In recent years, almost everyone in America afford a loan. Interest rates were low as rarely before. The demand for homes increased, and thus the prices also rose. And because the prices have increased so much, the real estate agent called at once cleaners or helpers to harvest, the five dollars per hour earned. They told them: If you are a home for $ 200,000 to purchase and the loan can not pay back, then it does not. The prices are rising. In five years, the house worth $ 300,000. Then you can find a new loan on the house and thus absorb the old pay. It can not go wrong.

So were the harvest workers and cleaners to the banks. And the banks gave them credit. They knew when they borrowed money is not refundable, it does not. Because then the house would be theirs. And in five years, it would indeed be worth $ 300,000.

It was a business in which it gave only winners. As long as prices rose. And that’s why the construction companies built more and more homes, 1.2 million years after year. And more and more people, more and more borrowed money to buy them.

Until this happened, what the renowned American economist Robert Shiller of Yale University describes succinctly: “That’s huge supply of new houses started supersaturate the market and property prices began to fall.”

Suddenly millions of Americans had no more new loans to their old mortgage finance. All at once realized the American mortgage banks that they are a lot of money they had lent, would not recover.

This money is stuck in the unsaleable properties. And it is in the pockets of the real estate agent and former owner who still houses have sold at a profit. It lies in the hands of cement manufacturers, the excavator driver and Maurer, who perhaps Japanese or German cars or refrigerators Chinese toys for their children purchased.

There are American mortgage banks, where this money is now missing. No German, English and Swiss financial groups. So how can it be that American banks verspekulieren - but financial institutions around the globe losses of 2.8 trillion dollars recorded? How is it possible that because of unsaleable homes in the desert of Nevada, the German bank Commerzbank, a capital injection of 8.2 billion euros needed?

Max Otte had said if we wanted to understand how the crisis could extend such, it was necessary to look at the financial services industry set. For weeks he speaks in his lectures on the capital markets, world stock markets. He speaks of the Wall Street of America, his second home, where he was in Princeton doctorate, taught in Boston before he received the American citizenship.

The financial services industry, which are mainly investment banks, had Otte said. Banks such as Goldman Sachs, JP Morgan, Morgan Stanley and Lehman Brothers, whose business is primarily equities, bonds, options and futures contracts turn. In reality, they do nothing other than mobile phone manufacturers: The constantly researching new, better phone. Investment banks are looking for permanent under the new, even better investment. Both want only one thing: sell your products.

The product, which ensures that the crisis around the world could spread, called Mortgage-Backed Securities. In a large scale has sold it as the first to italienischstämmiger investment banker from New York’s Brooklyn neighborhood. His name is Lewis Ranieri.

The rise of the black theater Piper Auditorium of Harvard University are fully occupied, as Ranieri in the days of the crisis enters the podium. He is sixty years old. Hair and full beard are gray become. The abdomen, however, in which he, then tells you on Wall Street, once the vast quantities of fast food hineinfutterte is still the same.

Ranieri has come to Harvard to explain how it all ran out of hand after its invention. He put his prepared speech to himself, and brings air - then he, and he says: “Oh, I’ll just talk to me like the beak has grown.” He says this in a broad working-class New York accent. Ranieri has not studied at Harvard. Also not in Stanford or Princeton. He has not studied at all, but it has brought more than the bankers from the Eliteunis.

30 years ago were the object of speculation for loans - for the rich

1968, just twenty years old, he joined the New York investment bank Salomon Brothers in the mailroom at. Organized he so efficiently that his bank for a job as a securities dealer offered. “He was a dissolute loudmouth and brash,” remembers a former colleague, “but he had the charm of a man who wants to be loved.”

Ranieri 1978 rose to head the recently created Department of mortgages at Salomon Brothers. The American had mortgage loans with a value of 1.2 trillion dollars in the country. Even in that year was the mortgage market is larger than the entire U.S. stock market. But while the profits from the stock market, millions of people could benefit, the mortgage credit is a transaction between two parties only. The money flowed from Bank A to person B and back again.

Ranieri changed das He made the mortgage market is a huge market in which anyone at any time, shares of the mortgage could acquire. He transformed the credit, the A at the American Bank B takes in an investment that is relevant to the German Bank C, D and British bank, the Swiss bank had e sale.

Ranieri individual mortgages bundled into a big pack, which he slices off and could sell - even those mortgage-backed securities, or MBS. In German: mortgage-backed securities.

Henceforth, the house buyers pay their mortgage interest only pro forma to the mortgage back. De facto, the money flowed into the pockets of those who had purchased mortgage securities: banks around the world, insurance companies, investment funds and their customers. All these buyers continued that as many people as possible A back their loans would be able to pay.

In theory, a good business for everyone. The borrower was able to buy a house, the buyer collects the investment interest, and the mortgage did not wait for years until they lent money zurückbekam. She had sold the loan and was a new award.

Even in practice it initially ran brilliantly: Ranieris MBS papers were top sellers. Other investment banks rose On.

Money houses and financial investors from around the world wanted to have the papers: Deutsche Bank, UBS, the Swiss, the French Crédit Agricole, the British Royal Bank of Scotland, Japan’s Mizuho Group. Sometime exceeded the demand for MBS papers the actual amount of mortgages in the United States.

So had her more mortgages. The mortgage banks lowered their award criteria. They asked no more equity, they asked no longer based on the income they were interested in harvesting workers and cleaners. And why should not the unemployed to buy three houses? Subprime was this type of loan called soon - second. In the years 2000 to 2005 increased its size to 495 billion U.S. dollars to 625 billion. Together with first packaged loans to solvent doctors or lawyers, could be just as subprime mortgages into securities verkaufsträchtige transform.

2005 Goldman Sachs poured tens of billions of dollars in premiums from

Ranieri has spoken in Rage. “As we, the system was invented, there was a house a lifestyle choice,” he exclaims. Later it was only sought to rising real estate prices to bet. “But prices may fall, even if we do not believe the long wanted.”

Even he does not.

During harvest, cleaners and helpers speculated on the future, the investment banks invented new financial products, the risks of these giant mortgage disguised. What under normal circumstances fraud hot have now contributed complicated names such as collateral debt obligations or credit default swaps. There are securities for which there is no economic justification, as the economic journalist Wolfgang Münchau in his book Vorbeben. As the global financial crisis means for us writes. Except one: “The fact that the investment banks, which they put on the market, high fees to pay.”

These fees increased the profits of investment banks and flowed in the form of bonus payments to their employees. Goldman Sachs, for example, one of the oldest New York investment banks, poured in 2005, at the height of the boom, ten billion dollars in bonuses to its employees. Power for each employee $ 500,000, but so has the bank is not expected. My former boss Henry Paulsen was alone, 38.3 million. Paulsen is now U.S. Treasury Secretary. Also with him is the money gone, after weeks in which he so desperately seeks.

The money then flowed So banks from around the world to American mortgage banks, with a strong lateral flow to the investment banks and their managers conducted. From it flowed the mortgage on the house buyers. And then again, it would be returned to the banks all over the world, to the owners of the loan documents - if the harvest workers and cleaners have to pay their debts can. When real estate prices would rise.

Located in the Frankfurt banking district, a skyscraper, of all the other high-rise buildings overlooking. It is 259 meters high, the second highest building in Europe, a triangular glass tower, whose top floors at night in bright yellow appear as if they were illuminated with color deleted. It is the yellow of the Commerzbank.

In the Commerzbank Tower 300 experts are looking for the former property

50 floors, the tower and nine artificial gardens, in which the employees of coffee and look over the city can. In the 19th Bamboo grows floor, in the 35th Floor there are olive trees, four floors above, the balance department. 300 people work there, from the 39th to 42nd Floor. They give no credit to buy any securities. Her work has nothing to do with the actual business of the bank to do so. Nevertheless, they have at the moment probably the most important job at Commerzbank.

You need to quantify how much money the bank has - or how much it is missing. More specifically: How much of the possession of the bank is still worth of securities, real estate assets, the credit exposures. They call the adjustments. The results will send them into the top floor in the boardroom, on the table for Eric Strutz.

They must be quite a few months these values corrected.

Strutz, the chief financial officer of Commerzbank. Nobody knows about the bank’s assets as well informed as he was. He is 44 years old, one of the youngest in Germany in his position. A powerful man with a firm handshake, and when he speaks, his listeners, he looks into the eyes, even if he is talking about unpleasant things, if, for example, he says: “This development of the markets was not predict.”

Had 1.2 billion euros, Commerzbank bank in the subprime securities invested. Most papers still owns it. But there is no one who wants to buy it. There is no market for the securities. In its balance sheet, the Commerz Bank, the papers but with exactly the same value terms: the market value. The papers and the mortgage are still there, but the market is not there anymore. The money is gone.

Part of it is gone forever remain empty, slowly decaying houses - but another part is likely to come back. Because it is not so that borrowers do not repay his debts can. Many Americans will do it. They are more work, less to buy their debts. Then money is flowing back to the owner of the loan papers, then again buyer for the papers found, these will get back a market, you just need to endure until the chaos sets. As a small shareholder whose car shares to a low point fallen. If he is smart and can afford it, he waits until the economy recovers. Then, stock prices rise again. And the money is coming back.

The problem is: Banks can not wait. “We need every three months, a quarterly report every twelve months the annual” says Strutz. While the governments in the wake of the crisis, the balance sheet rules changed, but still the banks have the bulk of the securities at the current market rate. If the date on the low, the loss is high. Is it too high, the bank goes bankrupt.

Only in America have had in the past few months 304 mortgage lenders and 22 banks went bankrupt. The biggest and most famous was the investment bank Lehman Brothers. Shortly after she made bankrupt, were also the three largest banks in Iceland before ruin, and then the state itself Icelandic And if Iceland is almost bankrupt, what is with Italy? Greece also is not at risk? And how strong are the finances of Croatia?

These questions have been raised in recent months, the financial investors throughout the world. Suddenly securities to lose value, with U.S. mortgages have nothing to do, such as Icelandic, Italian or Greek government bonds.

The consequence is that the 300 experts in the balance of the Commerzbank tower, the bank assets of their re-identify them. There will always be smaller. Based on the figures, which his accountant in the weeks supply may Eric Strutz the course of the crisis after draw. Adjustments because of the subprime crisis since August: 144 million euros. Due to the Lehman-Pleite: 371 million euros. Because of difficulties in Iceland: 260 million euros.

Who still has money invested - and after the crisis is richer than previously

The consequence is that banks around the world now urgently need new money to offset losses, much more money than in the U.S. subprime loans had flowed. Suddenly it is no longer about a few hundred billion dollars, but about several trillion.

The consequence is that it is on the stock exchanges in the world at one time a lot of money there.

But do not lose the shares of almost all the company for months in value? Is not the speech of 23 trillion dollars, listed on the stock exchanges were burned?

Right. The money is gone. But it is not burned. It is evaporated on the stock exchanges is a difference. Because water vapor turns back into water when it cools. Then again, the money needed. Then it’s back.

Only then it is usually other people.

»Go to 2iq times,” had Max Otte said, “and ask for Silvio Berlusconi.”

In an office building at an intersection not far from the Frankfurt bank towers brothers Patrick and Robert Hable and analyze data from the capital. There are specific data, so-called insider trading.

A pressure on the keyboard, and Patrick Hable can read on the screen, which most recently manager of its own shares for their private companies Depot bought. There are very many. “The leaders are using the low rates of the crisis in order to buy cheap shares,” Hable says.

It will take a long time until the share prices rise again permanently. But if it happens, is a large part of the trillion, during the crisis in the stock markets disappeared, coming back. And he will then include those taken during the crisis have bought: senior managers, rich investors, so those who have the money in past years has been received. For example, Silvio Berlusconi. In mid-October, bought the Italian Prime Minister and entrepreneurs for nearly 16 million shares media group Mediaset, such as on the stock so cheap to have been like never before.

Or Warren Buffett. The financial investor and richest man in the world has just 2.1 billion U.S. dollars for cheap shares of U.S. company General Electric bought.

Or the Saudi Arabian Prince Alwaleed bin Talal. Last week he announced that he would be 350 million U.S. dollars for shares of the American Citibank to acquire, just by the U.S. government 20 billion U.S. dollars of new capital has received.

China is using the crisis to be cheap in Western companies to buy

One of the biggest winners could hagerer, however, a man with rimless glasses who speaks softly and between sentences often a short smile einschiebt. The man says Gao Xiqing. On behalf of his employer, the People’s Republic of China, he should in the next few months, 80 billion U.S. dollars in foreign companies to invest. Gao Xiqing is head of the newly-founded China Investment Corporation (CIC), one of the largest SWFs in the world.

Nearly twenty years in the early summer of 1989, demonstrating the 55-year-old for a few days in Beijing at Tiananmen Square. However, before the army killed several thousand people, Gao left the square. He was, he says, came to the conclusion that there was a better way to democracy in China to strengthen its economy. 200 billion U.S. dollars, the government has put into the CIC. Gao Xiqing is thus the wealth of the Chinese state.

A year ago, Gao bought for five billion dollars a share in Morgan Stanley, the second largest investment bank in the United States. In April, he participated with 4.4 billion of JC Flowers, the fund of a former Goldman Sachs manager, with the objective of ailing financial companies cheap aufzukaufen. In September, Gao then flew to the U.S. and re-negotiated with the head of Morgan Stanley, he wanted his shares in the bank to expand 49 percent. The award was, however, the major Japanese bank Mitsubishi UFJ. For political reasons, they say. Already more U.S. politicians fear that CIC would buy up their land.

Gao Xiqing has always the same answer: Political influence is not his job. “We only want to make profit.”

He has just begun.

At the end of the interview, Max Otte had a book on the table. It’s called The Great Crash the 1929th The author, John Kenneth Galbraith, is two years ago at the age of 97 years died. He is considered one of the most important economists of the 20th Century. In his book he explains how the Great Depression of the thirties has happened. A German publisher has brought out new, Otte wrote the foreword.

Even the early thirties went bankrupt banks, the stock plunged from. Galbraith has an interesting explanation for this: the rich were to become rich.

The wealthiest 0.1 percent of Americans had had almost 40 percent of total assets. The result, so Galbraith: Many did not know where to put their money, began to speculate, for new investment products to search.

Never again was the prosperity of the United States as uneven as it was then. For several years, but the same situation again those supposedly in the Golden Twenties. And again there was the major crisis.

Were the rich to become rich again?

You can also rotate the perspective: Probably the poor in America have become too poor and not only them, not just the harvest helpers and cleaners, also the middle class. Meanwhile, have the bottom 40 percent only 0.2 percent of the total assets of the United States. Those who wanted to keep up socially, had in recent years only one choice: He had to borrow money. For the study of children, as health insurance for the house.

At the end, many people do not pay their debts. Therefore, the state pays now. Almost everywhere in the world.

In virtually all the major industrial countries, governments have become state rescue programs. They want the banks with money supply and thus the financial crisis by the losses incurred at least partly offset. In Germany, the banks have a fax or a letter in a yellow mansion in Frankfurt send in Britain, they must not even make an application, they get the money as well, a precaution.

How is it that it is ultimately the countries of the world, after the newly-built houses in the Americas finance. And the commission of Realtors, the bonuses of investment bankers, the wages of construction workers.

DIE ZEIT - THE TIME, Issue 49, 2008

By Kerstin Kohlenberg and Wolfgang Uchatius | © DIE ZEIT

Filed under: Financial Crisis, Oil Offshore Marine