Deutsche Bank's CEO Weakened by Losses

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Deutsche Bank sold its toxic US mortgage loans early enough, and before the flow of cash in the international capital markets ran dry, the bank was able to secure many billions of euros.

But then came Sept. 15, the day the Americans allowed investment bank Lehman Bros. to go bankrupt. Many securities with which the investment bankers had secured their positions, supposedly without risk, were suddenly worthless.

The financial tsunami hit the bank's results with full force, and Ackermann will have to present them in early February. Analysts say that the devaluation of the so-called securities that supposedly made the bankers' trades crisis-proof was responsible for losses of €3.5 billion ($4.6 billion).

Investment Banking Stars Tumbling

The stars that are now crashing down to earth include people like Richard Carson. Rich, as his friends call him, started working for the bank in 1996. By the spring of 2008, he had risen to become head of its London-based global equity derivatives trading unit. He engaged in energetic stock trading, partly with the bank's money, while at the same time spiriting away the associated risk with increasingly audacious options trades

The supposedly risk-free deals went well for a few years. Because investment bankers like Carson can treat almost half of their profits as personal property, he collected bonuses in the millions for many years.

Together with Carson, Nino Kjellman and Andrew Kent, two derivatives traders, were making a killing. Last September, Kjellman moved from London to Hong Kong, where he was named head of Asian equity derivatives trading and also took over risk control. That combination is seen as a recipe for disaster ever since British equities trader Nick Leeson sealed the demise of an entire bank while performing a similar dual role in Singapore. Officials at Deutsche Bank say, however, that Kjellman did not monitor his own deals.

The third member of the group was Andrew Kent, a young options trader who, after learning the ropes at Deutsche Bank, worked at a hedge fund for a short time, where he was allowed to wage bets with $500 million (€378 million) in so-called "volatility trading." But the boom years at hedge funds had already ended by early 2008, and bonuses at Deutsche Bank were pretty good too, so Kent returned to the bank last March.

Such rapid job moves are not unusual at Deutsche Bank. Investment banks and the supposedly far more risky hedge funds are all after the same deals. By early November, the game the three bankers had been playing was over. Their unit had gambled away $400 million (€303 million), and they had to go.

Huge Losses From Credit Derivatives Trading

As recently as the second half of 2008, a few hundred so-called proprietary traders were allowed to speculate, with a sum numbering in the double-digit billions, on the future development of stock prices, credit derivatives and pork bellies. This activity constituted up to 20 percent of all securities transactions at Deutsche Bank. In good years, proprietary trading was responsible for about one third of total profits.

New Yorker Boaz Weinstein, now 35, was one of the biggest stars. In early January, the bank announced that Weinstein, one of its co-heads of global credit trading, was leaving the company, together with 15 other traders. The men, who plan to start a hedge fund, have left behind a loss estimated at $1 billion (€757 million).

Weinstein learned his first strategic moves when he attended a chess school at the age of five. He later became a chess champion and, at 27, one of the youngest directors Deutsche Bank had ever had. At 31, he was believed to be earning more than $10 million (€7.6 million) a year, putting him in a similar salary bracket similar to that of his boss in faraway Germany.

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