Occasionally there is a message on Twitter that perfectly expresses the spirit of the times. The tweet from the new finance minister on April 13 was one such. On that day, the Institute for International Social History announced that the bank had apologized for its investigation into the role of ABN Amro’s legal predecessors in Dutch slavery history. The minister had written over retweet: ‘It is good that @ABNAmro acknowledges its own role in the past of slavery and apologizes for the injustice done to the victims. It is important that ABN talks to society about more diversity and inclusion in the bank. ‘ It is the perfect description of what has been forgotten in the fourteen years that have passed since the outbreak of the greatest financial crisis in the history of mankind.
In the early hours of Monday, September 15, 2008, the US investment bank Lehman Brothers filed for bankruptcy and closed its doors a few hours later. Maybe you remember the pictures of bankers dressed in shirt sleeves leaving the investment bank building in New York’s Times Square crying with cardboard boxes in their hands? The bank had collapsed due to an overly aggressive role in the market for packaged mortgages (‘securitizations’), too little equity (‘buffers’) and, above all, too much and too short-term financing of its own debt.
In an environment of collapsing housing markets in Florida and Colorado, and thus the depreciation of the ‘securitizations’ based on them, combined with an uncertainty about which bank had exactly what on its balance sheet, this led to a stalemate in the global interbank market, where banks like Lehman Brothers relied on their daily financing.
And as it should be in capitalism: If you can not pay off your debt, you will go bankrupt. Even though the management of Lehman Brothers had expected it would never come to that because the US Federal Reserve had rescued its little brother Bear Stearns six months earlier. This did not happen due to a combination of circumstances.
The Minister does not say a word about the ruins of 2008
The rest is history. As an investment bank, Lehman Brothers played a crucial role as an intermediary between local mortgage lenders and international lenders. Suddenly, thousands of credit commitments involving Lehman could no longer be honored. So Lehman took dozens of financial institutions with him down the abyss.
And as the work of American sociologists Neil Fligstein and Jacob Habinek has shown: It was mainly European institutions. For it turned out that it was neither domestic capital providers nor Chinese export assets that had caused the US housing bubble, but European big banks that insanely did not know how to fulfill their exorbitant profit promises to their shareholders and thus were overrepresented in the most risky US financial markets. Between 2002 and 2008, the major European banks increased their portfolio of US ‘junk mortgages’ by no less than 600 per cent. When Lehman fell, they owned a total of $ 1200 billion of these products. And most were financed with short-term interbank loans.
Here it is: ABN Amro was by far the most important player in this market, followed by German, French and British banks. But the other two major Dutch banks were also in the top ten. All three have needed state aid to survive. ABN Amro most of all. Although the most stony parts went to the Scottish bank RBS, which was allowed to clean up the British citizen, we had to put around thirty billion euros on the table to ‘save’ the Bank. In 2022, there is still an outstanding item worth more than seventeen billion euros. And while the man responsible for this debacle got a handshake worth thirty million euros, the Dutch citizen has faced ten years of tax increases and mega cuts.
And what is the Minister tweeting? She is happy for symbolic excuses and more ‘diversity and inclusion’. But do not say a word about the smoldering rubble in 2008. You know right away where the priorities lie.
This is Ewald Engelen’s last column. He stays in front The green write. His farewell essay will be published in a week