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 They have withdrawn several years of accounts and they wonder whether the business (their main profit generator) was conducted at all.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.

Anonymous said...

Dear John,

I would hazard a guess that if you would replace Wirecard with a Chinese company then you would see very high standards.

Thank you.

CrocodileChuck said...

'Financial regulator'

Is this the powder puff wielding BaFin?

It makes APRA look like a Doberman Pinscher

Person_XYZ said...

I’m genuinely interested in what happens in other countries with this type of thing. If the German press printed a series of articles showing that a British or Australian company was a big fraud, what would happen? In the case of Wirecard, it would have been a couple of days work to verify if the reporting was correct. The regulator didn’t want to look because it didn’t want the responsibility of showing investors they had wasted their money and that a fast growing company was junk.

Anonymous said...

Maybe not all is lost in Germany. The head of the German supervisory authority (BAFIN) did call the case an embarrassment for the country and his agency. He said the criticism of BAFIN's role is justified. That's a start.
(Report in German)

Anonymous said...

John John John, When are you going to realize that these "frauds' you see are just a cover story or a front for global money laundering, mostly for the benefit of the Left, the group you support.

BTW, The guy in the White House is exposing it everywhere.

Leonardo Voss said...

Would be interesting to see how you analyze a stock.

Anonymous said...

Similar thought: How about the way the Germans have lost a packet on the new Berlin airport. Or on their green energy transformation thats been such a huge flop they need to quickly build new coal power stations.

And in Australia: how about the TGA forcing Pan Pharma down the drain. Later, years later, they were found to be had regulatory overreach but by that stage too late - investors lost their money, Jim Selim lost his life, and no public servant sanctioned, sacked or thrown in prison. Great to be a regulator... the only time there is blowback is diddling the taxpayer with claims for sorting out your tax affairs.

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