
Dark Towers
Deutsche Bank, Donald Trump, and an Epic Trail of Destruction
Categories
Business, Nonfiction, Finance, History, Economics, Politics, Audiobook, True Crime, Journalism, Crime
Content Type
Book
Binding
ebook
Year
2020
Publisher
Custom House
Language
English
ASIN
0062878824
ISBN
0062878824
ISBN13
9780062878823
File Download
PDF | EPUB
Dark Towers Plot Summary
Introduction
In the spring of 1870, as German unification approached under Bismarck's leadership, a small group of bankers gathered in Berlin with an audacious vision: to create a financial institution that would challenge British dominance in global finance and support German commercial interests worldwide. This meeting marked the birth of Deutsche Bank, an institution whose 150-year journey would mirror Germany's own tumultuous history—from imperial ambition to Nazi complicity, postwar reconstruction, and ultimately, a spectacular fall from grace that threatened the global financial system. The remarkable transformation of Deutsche Bank from a conservative German lender into a reckless global gambling house offers profound insights into how institutional cultures evolve, how financial systems can be corrupted, and how the pursuit of profit without ethical constraints inevitably leads to disaster. Through the stories of charismatic leaders like Edson Mitchell and Anshu Jain, fateful relationships with clients like Donald Trump, and devastating scandals involving Russian money laundering and interest rate manipulation, readers will understand not just the mechanics of a bank's downfall but the human decisions and cultural shifts that made it possible. This historical account serves as an essential cautionary tale for business leaders, policymakers, and anyone concerned with the integrity of our financial systems.
Chapter 1: German Origins and Imperial Vision (1870-1989)
Deutsche Bank emerged in 1870 during a period of German ascendancy, established explicitly to challenge British financial dominance and support German commercial interests abroad. Unlike other German banks focused primarily on domestic industrial development, Deutsche Bank was global from its inception. Within just two years of its founding, the bank had established outposts in Shanghai and Yokohama, demonstrating its imperial ambitions that mirrored the newly unified German state's own expansionist vision. The bank's early history reflected Germany's tumultuous journey through two world wars and their aftermath. During the Nazi era, Deutsche Bank's moral compass failed catastrophically. The institution became deeply complicit in the Holocaust, financing the construction of Auschwitz, helping to "Aryanize" Jewish businesses, and even selling gold teeth extracted from concentration camp victims. After Germany's defeat in 1945, the Allies initially broke up Deutsche Bank into ten regional institutions as part of the denazification process. However, by 1957, these separate entities had effectively reunited under the Deutsche Bank name, with Hermann Abs—a banker who had served during the Nazi period—elected as their leader. The post-war decades saw Deutsche Bank become a pillar of Germany's economic miracle (Wirtschaftswunder). The bank maintained its conservative German banking traditions while expanding internationally. By the 1970s, it had become Europe's largest financial institution, with a balance sheet focused primarily on commercial lending to German industry. Deutsche Bank took ownership stakes in leading German companies like Daimler-Benz and Lufthansa, embodying the close relationship between banking and industry that characterized the German economic model. The bank's culture remained distinctly German—corporate retreats featured German actresses reciting German poetry, and its leadership consisted almost exclusively of German nationals. A pivotal moment came when Alfred Herrhausen became CEO in 1987. Herrhausen believed Germany needed a truly global bank that could compete with American and British financial giants. He accelerated international expansion and, most significantly, orchestrated the $1.5 billion acquisition of British investment bank Morgan Grenfell in November 1989—the largest-ever acquisition of an investment bank at that time. Just four days after announcing this transformative deal, Herrhausen was assassinated by terrorists, his armored Mercedes blown up by a roadside bomb. His death marked the end of an era for Deutsche Bank, but the seeds of transformation he had planted would grow in ways he likely never imagined. The fall of the Berlin Wall and German reunification created new opportunities and challenges for Deutsche Bank. The institution played a significant role in financing Eastern Germany's integration into the market economy, but also faced increasing competitive pressure from American investment banks that were revolutionizing global finance with new trading strategies and financial innovations. By 1989, Deutsche Bank stood at a crossroads—still primarily a German commercial bank with international operations, but poised for a radical transformation that would ultimately lead to both spectacular success and catastrophic failure.
Chapter 2: The American Invasion: Mitchell's Transformation (1995-2000)
In 1995, Deutsche Bank made a decision that would fundamentally alter its destiny: it hired Edson Mitchell, a charismatic American banker from Merrill Lynch, to transform its sleepy trading operations into a global powerhouse. Mitchell, who had grown up in a fading Maine mill town with a janitor father, embodied the American dream of rising from humble beginnings to financial stardom. Given unprecedented autonomy and resources, he immediately launched what one banker called "the greatest migration in Wall Street history," poaching hundreds of traders and investment bankers from top American firms with offers of "NFL-type salaries" that shocked the conservative German banking establishment. The cultural collision was immediate and severe. Mitchell's American traders mockingly referred to their German overseers as the "Forces of Darkness," while the Germans called the Americans "bandits and anarchists." This clash of cultures was visible in everything from dress codes to risk appetite. In Frankfurt, executives traveled with motorcycle escorts in bombproof Mercedes limousines, while Mitchell's London operation featured lavish parties and a freewheeling atmosphere where traders were encouraged to take enormous risks. One Deutsche Bank executive later recalled that the Americans "looked at us like we were from another planet. And frankly, we were." Mitchell positioned derivatives—complex financial instruments that derive their value from underlying assets—at the center of Deutsche's strategy, despite German executives' deep distrust of these products. He built a massive trading floor in London where derivatives specialists commanded the prime real estate, symbolizing their importance to the bank's new direction. Under Mitchell's leadership, Deutsche Bank quickly became one of the world's largest derivatives traders, with exposures eventually reaching tens of trillions of euros in notional value. This dramatic shift from traditional lending to complex trading would later prove disastrous when markets turned volatile. The American takeover accelerated in 1998 when Mitchell convinced Deutsche Bank to acquire Bankers Trust for approximately $10 billion, despite warnings that it was a troubled institution with serious managerial and accounting problems. This acquisition radically reshaped the German bank's profile. Prior to the merger, Deutsche's markets and investment banking arm had generated 29 percent of the bank's profits; a year later, that share jumped to 85 percent. The power had shifted decisively from Frankfurt to London and New York, with the bank's center of gravity moving from conservative commercial banking to aggressive trading and deal-making. By the summer of 2000, Mitchell's transformation was complete when he and his lieutenant Michael Philipp became the first Americans to sit on Deutsche's executive board. The bank that had once been 70 percent focused on German business now derived 70 percent of its investment banking revenue from outside Germany. Mitchell had successfully implanted an aggressive Anglo-American banking culture into the conservative German institution. However, his reign ended abruptly when his private plane crashed into a Maine mountainside in December 2000, creating a power vacuum that would be filled by those with even fewer scruples and less restraint. Mitchell's legacy was profound and ultimately tragic. He had transformed Deutsche Bank from a sleepy German lender into a global trading powerhouse, but in doing so, had planted the seeds of its eventual downfall. The aggressive risk-taking culture he imported, combined with inadequate risk management systems and a fragmented organizational structure, would lead the bank into a series of scandals and near-death experiences in the decades that followed. As one former executive later observed, "Edson gave us the keys to a Ferrari without teaching us how to drive."
Chapter 3: Profit at Any Price: The Ackermann-Jain Era (2002-2012)
In 2002, Josef Ackermann became Deutsche Bank's first non-German CEO, ushering in an era defined by relentless pursuit of profits regardless of risk or ethical considerations. A Swiss banker with a photographic memory and an obsession with numbers, Ackermann believed everything could be quantified and measured. In September 2003, he shocked the banking world by declaring an ambitious target: Deutsche Bank would achieve a pre-tax return on equity of 25 percent, nearly doubling its current performance. This wasn't merely a suggestion—it was a mandate that transformed the bank's culture and operations. Ackermann formed a powerful alliance with Anshu Jain, who had taken control of the investment banking division after Edson Mitchell's death. Jain, an Indian-born mathematician with a trader's mentality, built a formidable power base within the bank as his division generated up to 85 percent of Deutsche Bank's profits in some years. Together, they redesigned the bank's compensation systems to reward short-term profits without any mechanism to recoup bonuses if trades later lost money. Elite traders could now pocket annual bonuses of $30 million or more, creating perverse incentives to take enormous risks with the bank's capital. The consequences were predictable and devastating. Traders took ever-greater risks, knowing they would keep their bonuses regardless of long-term outcomes. The bank's leverage ratio—a measure of how much of its money was borrowed—reached a dangerous fifty-to-one, more than double the industry average. Meanwhile, Deutsche's computer systems became a hodgepodge of hundreds of different platforms that couldn't communicate with each other, making it impossible for the bank to measure or understand its true risk exposure. As one executive later testified, "The culture at Deutsche Bank was to do whatever it takes to generate profits, with regulatory and compliance issues secondary." Under Ackermann and Jain, Deutsche Bank embraced profits-at-any-price, with real-world consequences. The bank helped funnel money to countries under economic sanctions for pursuing nuclear weapons or participating in genocides. By 2006, Deutsche had transferred nearly $11 billion to Iran, Burma, Syria, Libya, and Sudan, with hundreds of millions wired to Iranian banks providing vital funding for terrorism in Iraq directly linked to the deaths of American soldiers. The bank also aggressively expanded into Russia, despite concerns about corruption and money laundering, acquiring United Financial Group in 2006 and developing relationships with bankers in Vladimir Putin's inner circle. By 2007, with its balance sheet bulging to about $2 trillion in assets, Deutsche became the world's largest bank. Ackermann was hailed as "the most powerful banker in Europe" and received an $18 million payday. When the 2008 financial crisis hit, Deutsche managed to avoid a direct government bailout—a fact Ackermann trumpeted as vindication of his strategy. However, this apparent success only reinforced the bank's dangerous hubris and delayed necessary reforms. In reality, Deutsche had received substantial support from the Federal Reserve and other central banks, and its balance sheet remained dangerously leveraged. As Ackermann prepared to step down in 2012, the full consequences of his tenure were becoming apparent. Deutsche Bank faced investigations on multiple continents, its reputation was in tatters, and its balance sheet remained dangerously bloated with risky assets. When Jain and German banker Jürgen Fitschen took over as co-CEOs, they inherited an institution that had become, in the words of one regulator, "a criminal enterprise with a banking license." The Ackermann-Jain era had delivered spectacular short-term profits but left Deutsche Bank vulnerable to catastrophic failure—a legacy that would haunt the institution for years to come.
Chapter 4: Dangerous Relationships: Trump and Russian Money Laundering
In the late 1990s, Deutsche Bank established a relationship with Donald Trump that would prove fateful for both parties. At the time, Trump was considered a pariah by most major financial institutions after a series of bankruptcies and defaults. Mike Offit, a commercial real estate banker at Deutsche, took a chance on Trump in 1998, approving a $125 million loan for renovations to 40 Wall Street. This initial deal opened the floodgates, with Deutsche Bank subsequently financing Trump World Tower and numerous other projects, despite internal credit officers discovering that Trump had vastly exaggerated his net worth—claiming $3 billion when the actual figure was closer to $788 million. The relationship survived a dramatic rupture in 2008 when Trump defaulted on a $640 million loan for his Chicago tower project. As the financial crisis unfolded, Trump sued Deutsche Bank for $3 billion, claiming the bank had caused the global economic meltdown and invoking a "force majeure" clause to avoid repaying his loan. Remarkably, even after this litigation, Deutsche Bank's private banking division—separate from the investment banking unit that had made the original loan—stepped in to refinance Trump's debt. Rosemary Vrablic, Trump's primary relationship manager at Deutsche, approved a series of loans totaling hundreds of millions of dollars at interest rates below 3 percent, shocking even to Deutsche insiders familiar with the bank's history of poor decision-making. Meanwhile, Deutsche Bank's Moscow office had become a hub for Russian money laundering. In 2011, a group of Moscow employees led by Tim Wiswell, an American trader heading the Russian equities desk, devised a scheme known as "mirror trades" to help wealthy Russians secretly move money out of the country. The mechanism was elegant in its simplicity: a Russian customer would give money to a Russian brokerage firm, which would buy shares from Deutsche's Moscow office in rubles. The same brokerage would then sell the same quantity of shares back to Deutsche's London arm, which would pay in dollars. These dollars were then transferred to Western banks in the original Russian customer's name. Over several years, thousands of these mirror trades, representing more than $10 billion, flowed from Moscow to London, then through Deutsche Bank Trust Company Americas in New York. Among the customers were individuals close to Russian President Vladimir Putin. The scheme generated enormous profits for Deutsche Bank's Moscow operation, and Wiswell's team celebrated with heli-skiing excursions and vodka-drenched nights at Moscow's high-end bars. "We lived like rock stars," one colleague would later write. In return for facilitating these transactions, Wiswell allegedly received millions in bribes, some delivered in bags of cash. The mirror trading scheme thrived due to catastrophic failures in Deutsche Bank's compliance systems. The bank's Moscow office had just one compliance officer, who lacked experience and resources. The bank's computer systems in Moscow, London, and New York didn't communicate effectively, making it difficult to detect the matching patterns of trades. In Jacksonville, Florida, the bank had assembled an army of poorly trained employees to review transactions, but they were overwhelmed by volume and incentivized to "just close the transaction" rather than investigate suspicious patterns. The convergence of Deutsche Bank's relationships with Trump and Russian money launderers raised troubling questions after Trump's election as president in 2016. Congressional committees, journalists, and prosecutors began investigating whether Russian money might have flowed to Trump's businesses through Deutsche Bank. The bank's fragmented structure and poor record-keeping made these questions difficult to answer definitively, but the mere existence of these connections—a president deeply indebted to a foreign bank known for laundering Russian money—represented an unprecedented situation in American politics and a profound failure of Deutsche Bank's risk management.
Chapter 5: Breaking Point: Regulatory Failures and Fatal Consequences
By 2013, Deutsche Bank was drowning in regulatory investigations. In the first eight months of that year alone, the bank fielded 5,777 requests for information from regulators—about one every hour. The Federal Reserve was particularly concerned about Deutsche Bank Trust Company Americas (DBTCA), the corporate husk of the old Bankers Trust business that had become a crucial conduit for the bank's American operations, including Russian mirror trades, loans to Donald Trump, and various tax-avoiding schemes for hedge fund clients. Bill Broeksmit, who had returned to Deutsche in 2008 to help manage its risks, was serving on DBTCA's board and was alarmed by what he found. The entity had barely a hundred employees but was responsible for channeling almost all of Deutsche's American business. Its technology dated back to the Bankers Trust era, with many employees relying on manual Excel spreadsheets. Financial reporting was so jumbled that nobody understood the underlying numbers. Broeksmit pushed for reforms, warning colleagues that the bank should be "more conservative" in its stress tests and that they needed "a more radical break from the past." In September 2013, the Federal Reserve reported the results of an intensive examination of DBTCA. The bank's systems were the "worst of our peers," officials were told. "Every key area has issues," and the problems identified were "just scratching the surface." The Fed soon downgraded a crucial rating that governed how much money DBTCA could borrow from the central bank—a bad sign that Broeksmit had anticipated but failed to prevent. Meanwhile, other investigations were accelerating. The Securities and Exchange Commission was examining allegations that Deutsche had deliberately hidden billions in losses during the financial crisis by inflating the value of derivatives. The Department of Justice was investigating the bank's sanctions violations and mortgage-backed securities fraud. The pressure took a devastating toll on Broeksmit. In February 2013, he told Anshu Jain he was ready to retire, saying he felt he wasn't "pulling his weight." Jain pleaded with him to stay on for several more months and to remain a DBTCA board member in perpetuity. Broeksmit reluctantly agreed, but the strain was evident. On January 26, 2014, Broeksmit committed suicide in his London apartment, hanging himself with his dog's leash. He left behind seven handwritten letters, including one to Jain. The bank immediately dispatched security personnel to the apartment and sent a technician to copy the contents of Broeksmit's computer, concerned about what sensitive information might be contained in his files. Broeksmit's suicide left behind a complex legacy that would continue to haunt Deutsche Bank. His adopted son, Valentin (Val), was devastated by the loss and began searching for answers. Val gained access to his father's emails and discovered thousands of Deutsche Bank documents, including communications about the bank's mounting regulatory problems. These materials would eventually find their way to journalists, exposing the depth of Deutsche's dysfunction to the world. Just days after Broeksmit's death, The Wall Street Journal published a front-page article titled "Fed Raps Deutsche Bank for Shoddy Reporting," based on a letter that had landed in Broeksmit's email account about a month before he died. The human cost of Deutsche Bank's recklessness extended beyond Broeksmit. Nine months after his suicide, Charlie Gambino, a senior Deutsche Bank attorney who had been handling the LIBOR investigation, also took his own life. These deaths underscored how the bank's aggressive culture and mounting legal problems were affecting even its most senior executives. As one former colleague observed, "These weren't rogue traders or low-level employees cracking under pressure. These were people at the very top who understood the full scope of what the bank had done and what it was facing."
Chapter 6: Final Reckoning: From Global Giant to Cautionary Tale
By 2017, Deutsche Bank faced a perfect storm of legal, financial, and reputational crises. The bank was under investigation on multiple continents for misconduct spanning two decades. Its stock price had collapsed to historic lows, and questions about its very survival dominated financial headlines. What had once been Europe's most prestigious financial institution was now described by the International Monetary Fund as "the most important net contributor to systemic risks in the global banking system"—a polite way of saying it had become the world's most dangerous bank. The legal penalties were staggering. In January 2017, Deutsche Bank agreed to pay $7.2 billion to settle U.S. claims related to its issuance of toxic mortgage securities before the financial crisis—one of the largest fines ever imposed on a bank. This came on top of billions in earlier settlements for LIBOR manipulation, sanctions violations, and money laundering. Between 2009 and 2018, the bank paid more than $18 billion in fines and legal settlements, an amount that exceeded its market capitalization. These penalties not only drained the bank's capital but also revealed the extent to which misconduct had become embedded in its business practices. The election of Donald Trump as U.S. president in 2016 created additional complications. Deutsche Bank now found itself as the primary lender to the American president at a time when it faced multiple investigations by U.S. authorities. Congressional committees began probing whether the bank had served as a conduit for Russian money flowing to Trump's businesses. The bank's long history of Russian money laundering made these questions particularly pointed. Deutsche executives found themselves in the uncomfortable position of having to balance their obligations to cooperate with investigators against the risk of antagonizing a powerful client who now controlled the executive branch of the U.S. government. In April 2018, Christian Sewing was appointed CEO with a mandate to fundamentally restructure the institution. Sewing, who had joined Deutsche Bank as a teenager in the 1980s, represented a return to the bank's German roots. He announced plans to dramatically scale back the investment banking operations that had driven the bank's transformation and subsequent decline. In July 2019, Sewing unveiled the most dramatic restructuring in the bank's history. Deutsche Bank would exit global equity trading entirely and create a "bad bank" to dispose of €74 billion in unwanted assets. Approximately 18,000 jobs—nearly 20% of the workforce—would be eliminated. The plan represented a final admission that the American-inspired investment banking strategy launched in the 1990s had failed catastrophically. Deutsche Bank was effectively returning to its origins as a European commercial bank focused on corporate clients and wealth management. The grand experiment that began with Edson Mitchell's hiring in 1995 and accelerated under Josef Ackermann and Anshu Jain had come full circle, leaving behind a trail of destruction: billions in fines, thousands of lost jobs, and incalculable damage to the bank's once-sterling reputation. Deutsche Bank's journey from respected German institution to global pariah offers profound lessons about the dangers of cultural transformation without proper controls, the risks of prioritizing short-term profits over long-term sustainability, and the inevitable consequences of ethical compromises in the pursuit of growth. What began as a legitimate effort to adapt to changing global markets evolved into a reckless pursuit of profit at any cost, ultimately threatening not just the bank itself but the stability of the global financial system. As one former executive reflected, "We wanted to be Goldman Sachs, but we forgot who we were in the process."
Summary
The tragic journey of Deutsche Bank represents one of the most dramatic transformations and subsequent implosions in financial history. At its core, this story reveals the tension between two competing visions of banking: the traditional German model of cautious, relationship-based commercial banking versus the aggressive, transaction-focused American investment banking approach. When Deutsche Bank abandoned its conservative roots in pursuit of Wall Street-style profits in the 1990s, it set in motion a decades-long process that would ultimately threaten its existence. The bank's leaders consistently prioritized short-term profits over long-term stability, creating a culture where excessive risk-taking and ethical compromises became normalized. From its complicity in Nazi atrocities to its facilitation of Russian money laundering and its reckless lending to Donald Trump, Deutsche Bank repeatedly demonstrated how institutional values can erode when profit becomes the sole measure of success. This cautionary tale offers crucial lessons for financial institutions and regulators alike. First, cultural integration matters enormously in banking mergers and expansions—Deutsche Bank never successfully reconciled the conflicting values of its German commercial bankers and its American and British traders. Second, governance structures must evolve alongside a bank's growing complexity; Deutsche Bank's fragmented organization allowed misconduct to flourish in silos beyond effective oversight. Third, compensation systems that reward short-term profits without accountability for long-term outcomes inevitably lead to excessive risk-taking. Finally, and perhaps most importantly, financial institutions that lose sight of their core purpose and values inevitably self-destruct. When profit maximization becomes the sole objective, the ethical compromises that follow will eventually undermine even the most powerful institution. As global finance continues to evolve, the Deutsche Bank story stands as a powerful reminder that sustainable success requires balancing ambition with prudence, innovation with integrity, and profit with purpose.
Best Quote
“Around the time that he canned Mike Offit, Mitchell organized a corporate getaway for hundreds of employees. The retreat was in a luxury resort overlooking Lake Maggiore, in the foothills of the Italian Alps. The bankers flew into Milan, and a fleet of Mercedes sedans chauffeured them into the mountains.” ― David Enrich, Dark Towers
Review Summary
Strengths: Enrich's meticulous research stands out, weaving complex financial details into an engaging narrative. The book's detailed account of Deutsche Bank's risky deals and scandals highlights the aggressive pursuit of profits over ethics. A significant positive is the examination of the bank's involvement in money laundering and regulatory violations, adding depth to the narrative. Enrich's portrayal of personalities within the bank, from executives to whistleblowers, introduces a human element to the financial story. Weaknesses: Dense financial terminology can be challenging for those without a finance background. The book could benefit from offering more solutions or insights into addressing systemic issues. Overall Sentiment: The book is generally well-received as an eye-opening exposé, offering a cautionary tale about the consequences of unchecked financial power. Key Takeaway: "Dark Towers" underscores the moral and ethical lapses in banking, illustrating the broader implications of corporate greed and the impact of deregulation on global finance.
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Dark Towers
By David Enrich