Monday, June 22, 2020

Olaf Scholz - the German Finance Minister is delusional

Wirecard - a major German fraud - is unwinding as I write this. They have withdrawn several years of accounts and they wonder whether the business (their main profit generator) was conducted at all.

Over 2 billion euro is missing.

This fraud has been well telegraphed for a long time, with several short cases and some excellent articles by the Financial Times providing a rare glimpse into a major fraud real time.

The financial regulator did no investigation of the fraud. But they investigated short-sellers for market manipulation, threw some in jail and filed criminal charges against the journalists who wrote ultimately correct articles about the company. 

As someone with "anglo" sensibilities I tend to think there is a real problem when bureaucrats throw people in prison and raise criminal charges for telling the truth. I thought that ended in Germany when the Wall came down (but I am clearly wrong).

No apology though.

To quote the Financial Times:
...Olaf Scholz, Germany’s finance minister, rebuffed calls for tighter regulation as a consequence from the Wirecard case. “The supervisory institutions worked very hard and did their job, which we see today,” said Mr Scholz in a video interview at the summit.
Mr Scholz is delusional. No rational outside observer thinks this was a good job.

But may I ask some questions:

a) if ignoring the evidence and prosecuting whistle-blowers is a good job what is a bad job? 


b) are German standards really this low - or is it only Mr Scholz's standards?

Just asking

John Hempton


Anonymous said...

Had heard that MB was chummy with the regulator from college (heard this from Germans with some first hand experience). A "made guy" I guess.

Would love some classic Hempton forensic analysis of the equity value of WDI. Surprised bonds are trading so distressed yet equity still trading over 1bn. No real hard assets to speak of but I imagine that between the Citi acquiring businesses and some of the customer relationships there might be 500m - 700m of net realizable value beyond the cash? Litigation, law enforcement and just business disruption issues arising from the crisis though could easily impair all of that and then some....

Makrointelligenz said...

Standards for government performance are indeed incredibly low. There is another state secretary Dr Scheuer who has quite obviously wasted 750 million Euro in taxpayer's money without any consequences so far. People here are now quite happy with anything better than Trump it seems. Standards for performances seem to go lower while standards for "appropriate" behaviour seem to rise. People like Scholz who believe in their own lies are quite popular, from a media point of view it is probably best for him to downplay the issue instead of trying to resolve the competence problem.

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