TERRY GROSS, HOST:
This is FRESH AIR. I'm Terry Gross. Next month, the U.S. Supreme Court will hear arguments on President Trump's suit seeking to prevent two congressional committees from acquiring a large trove of records about Trump's personal finances and business transactions. The records would come not from the president or the Trump organization but from Deutsche Bank, which is prepared to provide them if the court upholds the congressional subpoenas.
Our guest, New York Times financial editor David Enrich, has spent years reporting on Deutsche Bank, which in 2007 was the world's largest, with $3 trillion in assets. Deutsche Bank is known for its close relationship with Trump, but also for a series of scandals involving money laundering, tax evasion, violating international sanctions and accounting fraud, which have led to billions of dollars in fines and penalties from regulators. Enrich's new book chronicles the aggressive, profit-seeking culture that drove the bank's dramatic growth and also led to its rapid decline. Before joining The New York Times, David Enrich was a reporter and editor at The Wall Street Journal in New York and London.
FRESH AIR's Dave Davies spoke to Enrich about his new book, "Dark Towers: Deutsche Bank, Donald Trump, And An Epic Trail Of Destruction."
DAVE DAVIES, HOST:
Well, David Enrich, welcome back to FRESH AIR. Let's begin with the fact that Deutsche Bank has had an incredibly close financial relationship with Donald Trump dating back more than a decade - something like $2 billion in loans despite defaults and lawsuits. They kept doing business with him. Why was Deutsche Bank his bank of choice and not some bigger Wall Street name - you know, Goldman Sachs, whoever?
DAVID ENRICH: Well, other Wall Street banks simply wouldn't touch Donald Trump. His record of defaulting on loans and stiffing his business partners was very long and very well documented. And so any mainstream financial institution that had, you know, competent risk management systems in place, there is no way they were going to do business with Donald Trump. Deutsche Bank was different. It was trying to make a name for itself in the United States, and it was trying to really establish its brand on Wall Street. And as a second-tier player, it needed to go for customers that were not already banked by the cream of the crop on Wall Street, and Donald Trump fit that bill to a T.
DAVIES: Right. And he had his own issues with not paying Deutsche Bank back, but they somehow managed to keep forgiving him.
ENRICH: Yeah, this is the relationship that never seemed to end. Trump would default on a bond offering. He would default on a loan. He would sue the bank. And yet, time after time, Deutsche Bank executives kept going back to him for more business. And I think, in a word, the reason for this is it boils down to greed. The bank was so hungry for profits, for short-term profits, and so hungry to make a name for itself in the United States that it was really eager to just disregard any red flags that presented themselves with clients. And to be clear, it wasn't just Donald Trump they were doing this with; there's a who's who of the bad boys of Wall Street and kind of American capitalism - were some of the biggest clients for Deutsche Bank. Jeffrey Epstein is the biggest name that really pops to mind.
DAVIES: Right. It didn't hurt to - when you wanted to establish your name, to get an association with somebody like Donald Trump because that's going to be covered. And I mean...
ENRICH: Yeah. And it's not only that they want the association with Trump, although that is a big part of it; it's that they were hungry for any scraps they could get in America. And they were really - they went looking for customers who were unbankable by mainstream financial institutions and yet had a lot of money to throw around. And Trump, with his history of defaults and his pattern of ripping people off, really was the perfect customer for the bank.
DAVIES: There were so many transactions that you describe in this book. Why don't you just pick one that you think is illustrative? I mean, some of these are pretty remarkable deals.
ENRICH: Yeah, I don't even know where to begin. I mean, I think maybe the best one would be the loans, plural, that the bank did for Trump's skyscraper in Chicago. And this is a deal back in 2005. Trump went to the bank seeking $640 million to build this huge high-rise hotel and condos and retail on the Chicago waterfront. And the bank at this point had already had some problems with him and the - he had defaulted on a big bond offering. A bunch of executives had already developed real concerns about his links in the past to organized crime figures and the fact that he was possibly a money laundering risk, and yet they went ahead with this huge loan to him in 2005.
And a couple years pass, and the financial crisis arrives. And the construction is basically complete, but Trump is having a lot of trouble finding buyers for the luxury condos in this Chicago tower. And so he goes to the bank and asks for an extension on his loan, and they give him six months. And that time period comes up in November of 2008, right at the height of the financial crisis. And Trump decides that he is just not going to repay the loan. And so he looks for basically an escape clause in the loan contracts. And he claims that the financial crisis constitutes a contract void, an act of God. And instead of just making that claim on its own, he has the hubris to sue Deutsche Bank not only for trying to collect on its loan, but also for having caused the financial crisis.
And so this litigation goes back and forth for a couple of years. Deutsche Bank once again says, that's it; we're done with Donald Trump. We're never touching him again. He's embarrassing us. He's costing us money. He's gone. And then a couple years later, in - around 2011, 2012, Trump goes back to a different wing of Deutsche Bank for another loan also tied to the Chicago development and says, listen - I'd like to borrow $40 or $50 million from you so that I can repay what I still owe this other arm of Deutsche Bank. And lo and behold, Deutsche Bank says yes.
And to me - I mean, I've been covering finance in Wall Street for 15 or 16 years now, and I've never before seen something like this, where one arm of the bank decides - gets burned by a big client and then a different arm or the bank says, actually, it's fine with us, and we'll have you as a client, and we'll also give you a bunch of money to repay the loan that you've already defaulted on with the other arm of the bank. It's just bonkers.
DAVIES: Right. I think you said over 10 years, roughly $2 billion loaned to Donald Trump, right?
ENRICH: It's over...
DAVIES: Hard to tell?
ENRICH: Probably closer to 20 years.
DAVIES: OK. Wow.
ENRICH: But yeah, $2 billion is the right figure.
DAVIES: So as he is a serious candidate for president and then becomes president, executives at the bank become concerned about this relationship and their financial ties. Why is it a concern now that he might occupy the White House?
ENRICH: Well, there are multiple concerns. The first and, I think, the biggest is that he is - as a leading candidate for the president of the United States, he is what's called in banking terms a politically exposed person, which means there is a heightened risk of corruption. There's a heightened - there's all sorts of heightened risks for the bank in doing business with someone like him.
DAVIES: When you say a heightened risk of corruption, do you mean that he will have a corruption scandal or that people will see the relationship as corrupt?
ENRICH: That's a good question. It's really both. And the biggest - this is something - the term politically exposed persons is often applied to business a bank is doing in other parts of the world. And so there's a perception of a heightened risk that this person could be involved in bribery or that their money could be from kind of ill-gotten means. And the - so the bank was very wary of doing business with Trump as the election neared and, in fact, rejected a requested loan that he made in early 2016. But that - so that was one concern.
But the other that I've learned about more recently, which in some ways is more troubling, I think, is that inside the bank, compliance officers had been looking at some of the transactions that were going in and out of Donald Trump's bank accounts and Jared Kushner's bank accounts, too. Kushner was also a big client of Deutsche Bank. And what they were seeing was that money, in some cases, was flowing to international sources - in some cases, wealthy Russians - that raised a lot of concerns from a money laundering perspective. And so compliance officers within the bank essentially blew the whistle and said these transactions are troubling; we need to report them as suspicious to the federal government. And these concerns were kind of elevated up the flagpole within Deutsche Bank. And managers and executives at a higher level ultimately decided that, no, these concerns did not need to be escalated to the government or even reported to the government. And so - but within the bank, there is a big concern that something weird was going on in the Trump bank accounts.
DAVIES: Right. And we should just clarify that a suspicious activity report is - doesn't mean that there's wrongdoing, but it's a requirement when it meets certain criteria. And there are just thousands issued all the time.
ENRICH: There are thousands issued all the time. That's right. But it's pretty unusual, though, for a compliance officer to say that something needs to be reported and then be overruled by their managers or by executives of the bank. In general, banks tend to err on the side of extreme caution in these cases, and they err on the side of overreporting rather than underreporting. So the fact that Deutsche Bank, in this case, decided to overrule the issues raised by the compliance officers on the ground who had spotted these troubling signs, that's very unusual. But you're right; it does not mean - suspicion of money laundering or illicit activity is not at all the same as a fact of illegal activity or money laundering. And oftentimes, these employees are trained to err on the side of being conservative. So it was a suspicion. And...
DAVIES: And the bank wouldn't even take the routine step of passing along this little information (laughter).
ENRICH: Yeah, exactly.
DAVIES: Two congressional committees have subpoenaed Deutsche Bank for their records about Donald Trump. What are they looking for?
ENRICH: They're looking for different things. The committees are looking, first of all, at - for any evidence that Trump is or was in hock, essentially, to foreign governments, foreign individuals, and so they want to see his finances. They want to see his tax returns. They want to see his income statements. They want to see the finances of his companies and of his charitable foundation. That's thing one. Thing two is that, just in general, putting aside the issue of being in debt to foreign governments or individuals, they're very curious about how Trump has made his money, whether he's been paying the taxes required, whether there is fraud or other illicit activity going on inside of his companies or his personal bank accounts.
And so they are trying and have been trying for the better part of a year now to get access to the trove of materials that Deutsche Bank has on Donald Trump. It's really an unparalleled cache of documents that the bank has. And the Trump family has sued Deutsche Bank to block it from complying with the subpoenas that they have received from these congressional committees. And that is - that dispute has been kind of winding its way through the federal court system. Two federal courts have ruled against the Trump family and ruled that Deutsche Bank should comply with the subpoenas. But this is scheduled to go to the Supreme Court with oral arguments at the end of next month.
DAVIES: So the Supreme Court might rule on whether all this trove of financial information about Trump goes to a congressional committee and might then presumably become public?
ENRICH: I think they will rule. I mean, they - the - my understanding is that there will be oral arguments at the end of March and then a decision by June. And either they will uphold the lower court's rulings that Deutsche Bank does need to comply, in which case they - all this information, I mean, tons of it, will be in the hands of Congress, and presumably, knowing how Congress works, it will pretty quickly become public. And that'll be during the campaign, in kind of the height of the campaign over the summer. Or the Supreme Court will overrule these two lower courts and say that the bank does not need to comply with the subpoenas and that this is none of Congress' business. And if that happens, there is going to be a huge uproar, especially among Democrats, that the Supreme Court has taken really extraordinary measures to protect the secrecy of not just the president, but of his company and his family.
DAVIES: Yeah. Predicting court decisions is a bad business, but when you look at the legal arguments, does there seem to be a preponderance of opinion among reputable scholars as to where the law lies on this dispute?
ENRICH: Yeah. I mean, with the key caveat that I am not myself a legal expert, and I think it's a fool's errand to try and predict how the Supreme Court is going to rule on things. But the consensus among people I speak with is that the law is on the side of the congressional Democrats who are trying to get this information. And I think that's the expectation, that the Supreme Court will rule in line with the two lower federal courts. And it's actually more than two federal courts because there are a couple of related cases here that are all being consolidated together. And so a whole lot of federal courts have now ruled, all basically in the same direction, that the Deutsche Bank and also Trump's accounting firm need to comply with these congressional subpoenas. So we'll see. I mean, it's certainly the best hope that Congress has and, frankly, that the public has to get an unvarnished look inside of Donald Trump's finances.
DAVIES: You probably are better sourced at Deutsche Bank than just about anybody. Is it your understanding that the bank is prepared to cooperate and can assemble this information?
ENRICH: Yeah. My understanding is that they actually have assembled the information, and it's basically sitting somewhere. That somewhere maybe is inside of a computer. But it's sitting somewhere ready for them to provide, as soon as they get clearance from a court to do so. So - and what the congressional committees have said and what Deutsche Bank has said publicly is that the bank has actually been fairly cooperative working with Congress on this and is just waiting. You know, they have - they have to adhere to the law, which is that they can't disclose information about their clients without a valid court order. And so they need - they're waiting to see how the Supreme Court rules. But I think if the court uphold the congressional subpoenas, I think Deutsche Bank, more or less at the press of a button, can deliver all this information to Congress.
DAVIES: David Enrich is financial editor of The New York Times. His new book is "Dark Towers: Deutsche Bank, Donald Trump, And An Epic Trail of Destruction." We'll be back after a short break and talk some more. This is FRESH AIR.
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DAVIES: This is FRESH AIR, and our guest is David Enrich. He is financial editor of The New York Times. He's been reporting for years on Deutsche Bank and its close relationship with Donald Trump. He has a new book called "Dark Towers: Deutsche Bank, Donald Trump And An Epic Trail of Destruction."
This is quite a tale (laughter) you tell in this book of greed, dysfunction, arrogance. You know, this bank is now in its 150th year, and you write that, for its first 12 decades, it had a different identity than what it has become. What was the traditional Deutsche Bank?
ENRICH: Well, Deutsche Bank was founded to basically help large German and European companies spread their wings internationally. So it was founded in 1870, at the dawn of the industrial era, and it was basically built to help German companies export or provide infrastructure all over the world. For its first 100, 120 years, that's what it did. It did it with greater and greater ambition and in more and more places around the world, but it was fundamentally a bank that existed to serve its customers, most of whom were large corporations either in Germany or in continental Europe. And it did that with, you know, great success.
There is a brief interruption during World War II where they - the bank was deeply involved with the Nazis. But even after World War II, the bank was one of the leading forces for European construction and the reintegration of Europe. So with the exception of the Nazi period - which is a pretty big caveat, obviously - but with the exception of that period, Deutsche Bank, for the most part, in its first century or so of existence was kind of what you would expect in a big bank; it was there to help its customers succeed and help them to expand internationally.
DAVIES: We should probably mentioned that when - you know, when Deutsche Bank came into the United States in the succeeding years, it had to reveal more about its activities during the Nazi era. How closely were they working with the Nazi regime?
ENRICH: They were, I think in many ways, synonymous with the Nazi regime. This was the bank that helped do everything from finance the construction of concentration camps. It helped with the financing for the company that manufactured poison gas. It participated in the Aryanization of businesses all over Europe, including in countries that Germany had conquered. It was selling gold that the Nazis had extracted from the teeth of Jews, selling that internationally to raise hard currency for the Nazis. So this was a bank that was really an important part of the Nazi military machine.
Now, in fairness to the bank, that is true for most large German companies that existed at the time and still exist to this day. So it's not that Deutsche Bank was uniquely evil during this period, but the reality - and there's - I don't think there's any sanitizing this basic fact - the reality is that they were a party to genocide.
DAVIES: In the '90s, Deutsche Bank made a big change. What was it?
ENRICH: It decided that it wanted to get big on Wall Street. And this was the globalization - the era of globalization was just getting underway, and Deutsche Bank and its leaders viewed having a presence on Wall Street and in the city of London as essential to continuing to serve big global corporations that increasingly were all over the world - not just in one country and moving into another, but had presences in dozens and dozens of countries. And the one way to do that is to develop a business of helping bank - or helping companies raise money through, for example, issuing stock or selling bonds or hedging themselves against fluctuating interest rates or fluctuating prices for raw materials - stuff like that.
But instead of just doing that in a way that was designed to help clients succeed and help them kind of insulate themselves from volatility in the financial markets, Deutsche Bank took things a step further. And it decided that it wanted to itself get into the game of basically wagering on financial markets. And Deutsche Bank, in a very short period of time, went from this kind of traditional old-school European lender into a company that was really becoming a Wall Street casino and trying to take on the likes of Goldman Sachs and JP Morgan with these huge trading floors and these huge kind of adrenaline-fueled trading desks. And this - it was a very fateful decision for the bank.
DAVIES: Right. You described them - they got a guy named Edson Mitchell, who was from Merrill Lynch, and he hired so many people. You refer to it as the Great Wall Street Migration. Twenty-five hundred people came to work for Deutsche Bank.
ENRICH: Yeah. It was a complete transformation of a bank, basically on a scale that was - had really never been seen before in Wall Street history. Deutsche Bank went from being a complete nonentity on Wall Street and in London to being, virtually overnight, one of the leading players on the street. And they did that - Edson Mitchell was the one who led that charge. And he was kind of - he was a fairly impulsive, very charismatic, very energetic salesman. And he, through - I think largely through the force of his personality and through the power of persuasion of having a few billion dollars at his disposal to spend on hiring people, hired thousands and thousands of people and not just from Merrill Lynch, but really from across Wall Street. And so Deutsche Bank went - all of a sudden became one of the most aggressive places to work on Wall Street.
GROSS: We're listening to the interview FRESH AIR's Dave Davies recorded with David Enrich, The New York Times financial editor and author of the new book "Dark Towers: Deutsche Bank, Donald Trump And An Epic Trail of Destruction." They'll talk more after a break, and John Powers will review the new Amazon series "Hunters," starring Al Pacino as a Nazi hunter. I'm Terry GROSS, and this is FRESH AIR.
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GROSS: This is FRESH AIR. I'm Terry Gross. Let's get back to the interview FRESH AIR's Dave Davies recorded with New York Times financial editor David Enrich. He has a new book about Deutsche Bank, which in the 1990s embarked on a dramatic expansion in the U.S. and became the primary lender to Donald Trump after Wall Street banks had decided he was a bad credit risk. Enrich says Deutsche Bank's aggressive profit-seeking culture led to a series of scandals and the bank's decline in recent years. Enrich's new book is called "Dark Towers: Deutsche Bank, Donald Trump, and An Epic Trail of Destruction."
DAVIES: In 2002, a guy named Joe Ackermann becomes the CEO of Deutsche Bank. Tell us about him and the direction he took the company.
ENRICH: So Joe Ackermann had been at the bank for a few years at this point, and he was - he's Swiss German and is a member of the military reserves in Switzerland and a number cruncher and extraordinarily ambitious. And when he arrived at Deutsche Bank, he had one goal in mind, which is that he wanted to increase profits at the bank as quickly as possible. And he didn't really pay a whole lot of attention to the long-term side effects of that.
Now, his main goal was that he wanted the stock price of the bank to go up dramatically and very quickly. And he saw, correctly, that the way to do that was to maximize short-term profits at the expense of everything else. And it was an interesting change in direction for the bank because I think these days, most people say, well, of course, a big company's goal is to get its stock price to go up. And it - one clear way to do that is to increase profits. At the time, though, Deutsche Bank had spent, again, its first 12 or 13 decades, I guess, being run as an institution that had I think a slightly broader view of what constituted its mission.
And their goal was not just to maximize value for their shareholders. Their goal was to serve a bunch of different constituencies as well, whether it's their own employees, whether it's customers, the communities in which they operate, the governments that they serve and obviously shareholders as well. But shareholders were one constituency among many. And under Joe Ackermann, that shifted very quickly. And all of a sudden, Deutsche Bank's focus narrowed. And the top goal - and really the only goal, for all intents and purposes - was making as much money as quickly as possible for the bank's investors.
DAVIES: And we should note, I mean, he was a guy who was a really tough taskmaster. And the goals he set were kind of crazy, right?
ENRICH: Yeah. He, in essence, wanted to increase the bank's profitability within two years by about 600%. And that is, I mean, that is crazy. That - it's wildly ambitious, some would say reckless. And he was a taskmaster. And he was someone whose staff was very afraid of disappointing him. He had this reputation for - he could get extremely angry. And sometimes he would blame his subordinates for failings, not just in private, but also in public. So people were really scared of doing anything that would incur his wrath.
And so everyone set out to make Ackermann's mandate - make it their own personal mission. And so the entire incentive structure within the bank quickly changed. And the way that the bank decided whether or not to make loans or enter into other transactions for customers also changed. And if it wasn't going to be enormously profitable in the immediate term, they just wouldn't do the business anymore.
And that - you know, the consequences of that seem, with hindsight, fairly predictable, which is that the bank is going to be doing things that are not in customers' interests, but are in the bank's interests. And it's a very straight line, I think, between that mentality and a situation where the bank starts ripping off its customers, manipulating markets, laundering money, violating sanctions, on and on and on.
DAVIES: When the CEO of Deutsche Bank, Joe Ackermann, established these extremely ambitious goals for profits, the bank even went further, you write, in breaking rules, bending regulations. And I want to talk about some of the ways that they got into trouble. One of them was funneling money into countries that were under sanction - Iran, Syria, Libya. What did they do?
ENRICH: So the bank - this is an international bank. And it has a presence - a headquarters in Germany and presences all over the world. But because it has a big American operation, it has to adhere to American law. And American law at the time imposed very strict sanctions on, as you said, Iran, Syria, Myanmar and Libya, among other places. And - but Deutsche Bank want to do business in those countries.
The fact that they were under sanction in some ways increased the value of the services the bank could provide because there weren't all that many banks that were willing to provide financial services in those countries. So they just went ahead and did the business. And they took extraordinary lengths to conceal what they were doing.
And they engaged in a practice that was known as stripping, where they would remove any references to, for example, the Syrian counterparties they were working with in order to avoid triggering any alerts in their American computer systems or with American regulators. And over a period of several years, they engaged in billions of dollars of business with entities that, in Iran's case in particular, were very closely tied to the Iranian military and were later blamed for really helping finance the - a lot of terrorism that was going on in Iraq after the Iraq War.
DAVIES: What about money laundering?
ENRICH: Yeah, they liked that, too. They - and the money laundering business was very lucrative for Deutsche Bank, and it did it, really, all over the world. The biggest places it was doing it were with Russian customers. And Deutsche Bank has a long, proud history of being one of the few Western banks that has more or less without interruption been operating in Russia for a very long time.
And Russia in the early 2000s was a place where there were a lot of people getting very rich very quickly, often through suspicious means. And the - it became very important for them to have a way to get their money out of Russia and converted from rubles into euros or dollars or pounds. And the problem was that Russia imposed very strict controls on how people could - how much money they could move out of the country.
And many Western banks were very wary of doing business with these Russians because there were a lot of suspicions. And, in fact, it was true that a lot of this money came through corruption or kleptocracy, things like that. And Deutsche Bank was very happy to fill that void. It arranged for a number of workarounds for Russians where they could either move their money to a country like Latvia, for example, and then have it wired into the U.S.
There is a whole scheme known as mirror trading, where Deutsche Bank's Moscow office would help wealthy Russians use a bunch of kind of sham offsetting stock market transactions to get their money converted from rubles into euros or dollars. And so through these various means and billions and billions of dollars, I think well over $10 billion over a period of time was converted from rubles into Western currencies. It went through the bank's American legal entities. And it became, I think, the leading provider of money laundering services to Russians anywhere in the world.
DAVIES: I'll just list some of the other things that the bank did. We could spend the entire hour talking about them. But among them, you know, peddling collateralized debt obligations - which were kind of money losers - to clients, even though traders at times knew they were going to be a problem. They had a scheme to manipulate the London Interbank Offered Interest Rate. This is a complicated thing which involved manipulating that rate. That ended up being a big scandal. They had questionable schemes to help hedge funds hide taxes. They did derivatives, which effectively destroyed the oldest bank in Italy - right? - this bank in Siena.
DAVIES: This - there was just a lot going on, much of which they eventually suffered serious sanctions for. How...
ENRICH: And you're just scratching the surface. I mean, we're not talking about manipulating currency markets or engaging in bribery or all sorts of things like that. So it's a long, long list.
DAVIES: Right. It's interesting; you describe that Deutsche Bank had an office in Jacksonville, Fla., of all places, with a lot of employees, doing what?
ENRICH: This is where the bank's anti-money laundering offices were set up and, incidentally, right next door to the FBI's local field office, which was kind of a running joke among employees in Jacksonville - that when the FBI inevitably raided their offices, they wouldn't even have to drive; they could just walk. But this was a place where they have thousands and thousands of employees who are trained to look for potentially suspicious transactions involving money laundering, tax evasion, bribery - things like that. And it's a - in any bank that is one of, if not the most important operations to prevent a bank from getting into trouble and violating the law.
And Deutsche Bank's operations there were a catastrophic mess. I've talked to probably 20 people who either currently or previously worked there. And without failure, every single one of them has told me that they have never worked at an institution as messed up as Deutsche Bank. And the reason it's messed up in this case is not that their employees aren't good at what they do; it's that the bank essentially set them up to fail. They had - their technology systems were completely out of date. People weren't properly trained in some cases.
But more than that, there's just enormous pressure from their higher-ups to just, you know, churn through transactions as quickly as possible. And the less of a fuss you raised about any particular transaction, the better. There was enormous pressure to just get deals done, as one person told me. And that's obviously antithetical to the notion of doing a good job and taking a close look and really being conservative about whom you're doing business with. And - but that was the Deutsche Bank way.
DAVIES: Right. So they had to have this sort of compliance operation, but they really didn't want to know if there were any problems.
ENRICH: Yeah. And as ever with Deutsche Bank, the pressure was to maximize profits in the short term as - to the greatest extent possible. And having something like a big, robust compliance division, that's what's known in the industry as a cost center. It's expensive to operate. It doesn't make any money. And in fact, it just - it only is going to lose your business - right? - because they're not presenting you new revenue opportunities; they're there to say no. And at Deutsche Bank, saying no was really - the most likely outcome of saying no a lot was that you would lose your job.
DAVIES: That's the wrong answer (laughter).
DAVIES: David Enrich is financial editor of The New York Times. His new book is "Dark Towers: Deutsche Bank, Donald Trump, And An Epic Trail Of Destruction." We'll talk more after a short break. This is FRESH AIR.
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DAVIES: This is FRESH AIR, and our guest is David Enrich. He is financial editor of The New York Times. He's been reporting for years on Deutsche Bank and its close relationship with Donald Trump. He has a new book called "Dark Towers: Deutsche Bank, Donald Trump And An Epic Trail Of Destruction."
I have to say, one of the things reading this story that struck me again and again was how ineffective banking regulation seems to be. I mean, you know, federal prosecutors assemble information, they bring criminal charges, and (laughter) it's serious. It seems that banking regulators nudge. You know, there's a problem here. Let's get better. A year later, it's still not better. I mean, I know that there are overlapping responsibilities, and it's complicated. But, boy, it just doesn't seem like there's really much effective monitoring of this stuff.
ENRICH: Yeah, it's really - there's a deep-seated culture of not wanting to rock the boat. And I think part of that is that regulators often end up going to work in the private sector, sometimes for the banks that they had previously been regulating. I think part of it is that there is just a priority put on keeping things quiet and not wanting to destabilize a bank by publicly criticizing it. But whatever the reasons for it, I think it's enormously destructive. And this is something that, even after the 2008 financial crisis, when the whole world saw the risks of having an inadequately regulated banking system, this still continues. And I think, in fact, it's probably getting worse under the Trump administration right now.
DAVIES: Give us a sense of how this misconduct - the funneling money into countries under sanction, the money laundering, the interest rate and market manipulation - how serious were the penalties imposed on the bank over a period of time for all this stuff?
ENRICH: Well, it's - Deutsche Bank has received well over $10 billion in government penalties since the financial crisis for a whole range of criminal and other misconduct. And it is one of the banks that has been most severely penalized by governments all over the world, relative to any other financial institution. And I think that is a - it's really not a surprise, I think, given the priorities and incentives that were set up in the decade before the financial crisis, where they were just prioritizing short-term profits above all else. And the misconduct that they - that Deutsche Bank has gotten in trouble for is I think that's the most visible and kind of digestible manifestation of the serious trouble the bank has been in. But in reality, I think the problems are much deeper than that, and they go to the core of the bank's finances. And Deutsche Bank, for many years, thrived by taking shortcuts and flouting the law.
And in an era now where that has become a little bit less acceptable and investors at least are more attuned to the risks of that, the bank's business model is essentially broken, and the bank cannot really figure out how to have a sustainable model going forward and how they're going to make money in a way that is good for shareholders, good for customers, good for the communities in which they operate. So they're right now trying to return to their roots as a bank that was existed to serve not just shareholders, but a much wider range of constituencies. And it's hard, and it's not clear that they're going to succeed.
DAVIES: So is the very existence of the bank in doubt?
ENRICH: The - yeah, I think that's safe to say. And I don't think the bank is about to run out of money or go out of business, but in the past year, they have explored very seriously a number of strategic alternatives that include merging with one of their rivals in Germany. There's a lot of pressure on the bank to shrink dramatically. And I think there's - if you look at the bank's stock price, it has improved in the past several months. But there's still such grave doubts about its viability going forward that you see it trading at just a fraction of what it had been several years earlier.
DAVIES: This is a fascinating story of taking the wrong direction and suffering consequences. But what's the broader concern here? Why should we care about what this big international bank does? And we should remember that banks aren't just private institutions; they have an effect on the broader economy, right?
ENRICH: That's true. And the consequences of this, of Deutsche Bank operating in this completely reckless, out-of-control manner for many years, it's not - this is not just an issue that affects banks; it affects the broader economy as well. And Deutsche Bank has bankrupted companies. It has bankrupted governments. It's driven - it's certainly driven many individuals to despair. And the consequences go beyond that, too. I mean, the fact that Deutsche Bank was so motivated by making as much money as possible as quickly as possible, consequences be damned, is - that's exactly how they got in bed with Donald Trump. And I think that's a big part of the reason that Donald Trump is president today - because of the financial support he received over many years from his lender of last resort.
DAVIES: David Enrich, thanks so much for speaking with us.
ENRICH: Thanks for having me.
GROSS: David Enrich is The New York Times financial editor. He spoke with Dave Davies about his new book, "Dark Towers: Deutsche Bank, Donald Trump And An Epic Trail Of Destruction."
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GROSS: After we take a short break, John Powers will review the new Amazon series "Hunters," starring Al Pacino as a vigilante Nazi hunter. It's set in the '70s, but John says it's very much of our time. This is FRESH AIR.
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