Amidst Hallucinatory Upswing Fantasies, German WestLB Creates Bad Bank

In an exemplary clinical case of today's reigning lunacy, the Financial Times Deutschland today carries the front-page headline "Upswing Almost Unstoppable" with a glowing picture of a golden 2010 and a blue sky with rays behind it. It refers to German "economists," who "predict" that, magically, from January on, everything will become better, with 2.5% growth to come.

It is suspected, that the only industry to which these figures might eventually apply, is the pharmaceutical industry...

As if to prove, how great things really are, the same page carries right next to this, an article on the state bailout of WestLB, Germany's third-largest state bank. It is bankrupt, and was only saved by the decision of SOFFIN, the state financial rescue committee, to jump in. WestLB, with a balance sheet of EU254 billion, is considered to be systemic, and therefore this decision was taken. Before this, the state had only intervened with the private banks Commerzbank and Hypo Real Estate.

The owners of WestLB are the state of North Rhine-Westphalia and public N.R.W. savings †loans banks. WestLB is now creating a bad bank for EU85 billion in toxic paper, which is the result of its highly speculative activities over many years. For that, it is taking EU3 billion from the "healthy part" to cover for upcoming write-offs into the bad bank. For further writeoffs, up to EU17.5 billion, the owners have to give a guarantee — i.e., the taxpayers and the SÃs' clients, who are mostly regular people and firms. For the "good bank," SOFFIN is providing EU3 billion (the same amount that is being put into the bad bank) for the core capital.

All of this is being used to finally abolish the Landesbanken sector, which are at the same time under attack from the EU, which is demanding step-wise privatization. Thus, the former instrument of the SÃs/state bank system, which was designed as an important credit instrument for regional and state development, is being eliminated.

These actions are designed merely to temporarily stem the tide of the continuing global financial and economic collapse. European nations, in the stranglehold of the EU, and with no real sovereignty, have no real power to intervene on their situation. This is where LaRouche's solutions of a four-power agreement come in- coupled with the mid-October collaboration between Russia and China. Only with a bankruptcy reorganization of the world system, led by a Pacific bloc of nations, namely Russia, China, India, and the United States, and a return to Glass Steagall standards of banking within the confines of a new international credit system of sovereign nations, is there a perspective of an end to the present breakdown.