Depfa 'was not only problem for Hypo'

MEMBERS OF a German parliamentary inquiry into the near collapse of property lender Hypo Real Estate (HRE) have said problems were inherent across the bank group, not just in Dublin subsidiary Depfa.

Germany’s opposition parties suggested yesterday that, although Bundesbank auditors sounded the alarm several times last year, finance minister Peer Steinbrück was in the dark about the true state of HRE’s finances in September when he approved €35 billion in loans and guarantees that has since ballooned to €102 billion.

“I think he didn’t know about the various reports and was clueless when he acted in September,” said Dr Volker Wissing, finance spokesman for the opposition Free Democrats (FDP). “Anyone who read the reports would have known that €35 billion would not be enough.”

The official HRE narrative is that the collapse of Lehman Brothers on September 15th caused liquidity markets to seize up worldwide, bringing Depfa close to collapse because it could no longer finance its long-term loans through short-term credit.

Considering HRE’s key role in Germany’s Pfandbrief or covered bond business, it was considered too big to fail and propped up. The finance ministry says that reports it received on HRE/Depfa highlighted theoretical risks which only became real through the Lehman’s collapse. Opposition politicians claim otherwise, accusing the government of negligence for ignoring warnings and Mr Steinbrück of squandering billions of taxpayers’ money.

On Wednesday, the federal government took control of the bank. Through the parliamentary inquiry, opposition parties want to know why the finance ministry apparently ignored a series of reports in 2008 by German auditors, including an examination of Depfa’s books in Dublin that found 49 violations of proper conduct.

In their sights is Mr Steinbrück’s right-hand man, Jörg Asmussen, state secretary in the finance ministry with responsibility for finance markets.

The final report by Bundesbank auditors, expressing huge concern about Depfa’s operations, would have landed on his desk in March, six months before HRE’s problems.Mr Asmussen says when the report arrived he was on holiday. When he returned, his holiday cover had filed the report away.

Through the inquiry, opposition politicians have discovered that at least five reports from auditors were sent to the finance ministry.

“We don’t think that Mr Asmussen was on holiday for all of these days,” said Mr Wissing yesterday.