NEW YORK, Aug 22: The process of small unhindered bank taking over big beleaguered bank has started. The first transaction was inter-continental, an American bank taking over a German bank which sounds rather unusual at a time when the all mighty United States is facing an economic downturn that has left everyone in the Wall Street aghast.
America's equity firm Lone Star acquired the German bank IKB Deutsche Industrial bank that was once reputed for its conservative lending policy.
The German IKB bank was up for grab at a throw away price. It will be sold ' low in the single-digit millions'. The German state bank KfW holds the majority shares in the bank. The German central bank injected in vain billions into IKB to keep it afloat.
The German government was hoping to net $1.17 billion. Lone Star taking advantage of a credit crunch had also acquired the 'asset back securities from Merrill Lynch, paying $6.7 billion for investments that Merrill once valued at $30.6 billion', the New York Times (NYT) reported today. The Lone Star will mainly finance Germany's export trading.
IKB Deutsche Industrial bank is seen as a bank that unleashed the subprime mortgage crisis in Europe. For the German government the deal ends a painful saga that left the central bank and by extension the government on the hook for a substantial cost, NYT reported. The German central bank's ultimate loss will stand at eight billion euros.
In another development three major investment banks Merrill Lynch, Goldman Sachs and Deutsche bank will soon buy back $12.5 billion auction rate securities and pay a fine of $162 million. Citigroup, JP Morgan Chase, UBS, Wachovia earlier had consented to buy back $35 billion worth of securities and pay a fine of $360 million. Bank of America is also negotiating for a similar agreement.
Meanwhile, the Securities and Exchange Commission (SEC) is investigating individuals at several firms that sold auction rate securities .The investigation into both potential corporate and individual violations is continuing.
Shantanu Barua has been appointed acting administrator of the Small Business Administration. He will not require senate confirmation and will be in service in the remaining period of the Bush administration. Barua's principal concern will be to protect the interest of the small businesses. There have been allegations of business meant for small entrepreneurs being diverted to big corporations.
Barua's goal will be to either eliminate the Small Business Administrations or merge it with the Commerce Department. Barua had earlier served the US Commerce Department. Barua, 43, also served under senior Bush working as a legislative affairs officer in the Labour Department. He was also the confidential assistant to the Interior Secretary.
The small to the rescue of biggies
From Fazle Rashid | Published: August 23, 2008 00:00:00 | Updated: February 01, 2018 00:00:00
Share if you like