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Germans panic over KfW-to-Lehman cash scandal

Latest update : 2008-09-20

After a transfer of 300 million euros from German state-owned bank Kreditanstalt fuer Wiederaufbau to Lehman Brothers on Monday, just before Lehman's meltdown, German account holders are in a panic; some fear runs on the bank.

Germans frightened by global financial turbulence are turning to therapists, running to their banks and facing unwanted reminders of their history even though their direct exposure to the turmoil is limited.

 

The financial crisis has been dominating German news broadcasts and headlines all week, fuelling a wave of angst. Conversations at the water cooler and on commuter trains invariably turn to worries over jobs, mortgages and savings.

 

"There's a very high degree of uncertainty out there right now," said Gerrit Grahl, a psychotherapist in Frankfurt's banking quarter who treats 400 patients a year -- with managers and bankers now outnumbering all other professions combined.

 

Grahl got many new patients after Germany's number two bank, Commerzbank, recently announced plans to acquire Dresdner Bank, the country's third largest. He expects a "snowball effect" now.

 

"It's a strange feeling," said Grahl, whose office stays open until midnight as a service for bankers and managers. "I had one banker in for an appointment last night at 11 p.m. and he told me to get ready for more colleagues ready to come in."

 

"These are motivated, hard-working professionals trying to maintain composure but are actually having severe problems. They say everything's falling apart and they're losing control but have to keep a stable appearance. It's eating them up."

 

Germans are especially sensitive to financial troubles.

 

The hyper-inflation of the 1920s Weimar Republic that wiped away their assets and paved the way for Adolf Hitler's rise is as deeply embedded in the hearts and minds of Germans as is the loss of wealth from World War Two and a postwar currency reform.

 

"Certainly there are fears running deep in Germany," said Heinrich August Winkler, a historian at Berlin's Humboldt University. "In the Weimar era, Germans were obsessed with fears of inflation. It was a great national trauma.

 

"But Germany has learned from its history how important it is for tight controls on banks," he told Reuters. "The banking system today has a much more solid foundation, as the finance minister regularly and rightfully points out."

 

BANKING WORRIES

 

Despite their limited exposure to the crisis, they were rocked by news that state-owned Kreditanstalt fuer Wiederaufbau (KfW) bank made an ill-timed 300 million euro ($426 million) transfer to Lehman Brothers on the day it filed for bankruptcy protection.

 

Winkler said KfW's move was unfathomable for many Germans.

 

 "It's an incredible scandal, just shocking," he said.

 

Winkler said the fact that Finance Minister Peer Steinbrueck and Axel Weber, president of Germany's fiercely independent central bank, have made such frequent public reassurances about the sturdiness of Germany's banking system shows nerves are raw.

 

An executive at a large chain of German savings banks in Berlin said there had been a huge increase this week in the number bank customers demanding detailed information about the security of their savings and investments.

 

"We've never seen anything like this," he told Reuters. "Some of the customers are demanding a guarantee in writing."

 

Ordinary Germans admit they are becoming unhinged by the steady drumbeat of "banking crisis" reports on the news.

 

"It's serious this time," said Dieter Koch, a 52-year-old from Hamburg. "But I'm not going to run to the bank to get my money and stash it under the mattress. That would be senseless."

Date created : 2008-09-19

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