Ach Der Leiber!




Can't Be Allowed to Happen'
Hundreds of millions of euros from a German government-owned bank went down the drain with Lehman Brothers on Monday after a strange deal that has left many people scratching their heads. Why would a German bank transfer €300 million to an American Wall Street firm after it filed for bankruptcy?

German Finance Minister Peer Steinbrück says he's as baffled as anyone.

The German Finance Ministry declared itself shocked -- shocked! -- on Wednesday at the news that a state lending bank, KfW, had transferred €300 million ($426 million) to Lehman Brothers in New York on Monday, just after the investment bank collapsed.
"What we have had to read today is astonishing and exasperating," Finance Ministry spokesman Torsten Albig told reporters. "We expect a swift explanation of such a technical failure, which is inexplicable to us."

The trouble is, KfW is overseen by the Finance Ministry, among other elements of the German government, and the country's finance minister, Peer Steinbrück, holds ultimate responsibility for the bank's health. Ratings agency S&P said KfW's sudden exposure to such a loss would not hurt the bank's credit; but KfW was already burdened by the collapse of another German bank, IKB, in the wake of the subprime crisis last winter. KfW was IKB's largest shareholder, and it oversaw a deal -- on behalf of the public -- to sell the bank to American investors at the firesale price of €100 million. The bargain basement sale, however, came only after taxpayers were required to pay billions to bail IKB out.

The money transfer between KfW and Lehman was called an erroneous swap -- a swap being a derivative agreement between two parties to exchange one stream of cash flow for another. German papers on Thursday morning are no less shocked by the deal than the Finance Ministry, and they want an explanation for what seems like terrific mismanagement of publicly insured money.