The Schauble Legacy: Politics uber alles.

• Author: Dubel, Hans-Joachim

Wolfgang Schauble, lawyer, lifelong party soldier, and member of the German Bundestag since 1972, was appointed in 2009 at the age of 67 to the post of German finance minister. This was during the financial crisis that started in the United States and exposed the failures in the German banking system. It soon became apparent how involved both leading Volksparteien--the CDU/CSU and the SPD--were in the scandals of the public Landesbanks. Their politicians in the German states caused billions in losses through the pervasive neglect of basic governance standards.

In 2001, Schauble's CDU had collapsed politically in the state of Berlin after the Bankgesellschaft Berlin real estate scandal. In 2009, the situation was different: both the SPD and the CDU had a major hand in the narrowly avoided collapse of Germany's financial system, and in fact in creating the crisis to begin with through inflating America's housing finance system. Schauble's predecessor at the finance ministry, Peer Steinbruck of the SPD, as governor of the state of North Rhine-Westphalia had overseen double-digit billions in purchases of U.S. mortgage assets, including derivatives, for the Westdeutsche Landesbank, which was eventually shut down. After moving into the role of crisis management, CDU veteran Schauble adopted the principle that cover-up was in the bipartisan interest. Draconian measures taken to this end included staffing the bank rescue agency SoFFin with former Landesbankers and threatening members of parliament sitting on the SoFFin oversight committee with two years of jail for leaks.

To keep the SPD politically in line with the cover-up strategy as the coalitions changed, Schauble retained Steinbriick's deputy, Jorg Asmussen, in the ministry as undersecretary. Asmussen had been responsible for the botched nationalization of Hypo Real Estate, and the loss-making Commerzbank rescue investment. With additional lavish bad bank arrangements, such as Hypo Real Estate's transfer of all Greek exposure at par to FMS Wertmanagement, a bad bank set up by the federal government, the government expanded the Landesbanken investor bailouts to investors in private banks. In this way, subordinated creditors and even hybrid capital investors in the entire German banking system were left largely unscathed. These included important campaign sponsors.

Could such a veteran of domestic political tactics be expected to develop into a crisis manager who protected taxpayer interests...