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Six Questions For Axel Weber

 February 19, 2010 12:08 PM

By Simon Johnson

Given recent maneuverings around European Central Bank (ECB) appointments and the obvious discomfort of Mario Draghi – he carries the Goldman Sachs connection now like other people carry albatrosses – the German financial-industrial complex seems to regard Axel Weber as a "done deal" to become the new ECB president.

Such an assumption is premature.  Mr. Weber, as long standing head of the Bundesbank and general German economic maestro (including, quietly, on fiscal issues), is due to face his own round of questioning – if you listen carefully, you can hear southern Europeans sharpening their arguments, and with good reason.

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There are six important and difficult subject areas for Mr. Weber.

  1. Who was asleep at which wheel when Deutsche Bank was allowed to become one of the most leveraged banks in the world, betting and losing heavily on subprime mortgages – among other things?
  2. What exactly was Mr. Weber's involvement in the Hypo Bank debacle?  Germany likes to claim that it can regulate large banks effectively – and there is no reason to limit their size.  To the rest of us, it seems like Germany can't even regulate and control relatively small banks.
  3. Why does Germany continue to resist sensible proposals to increase capital requirements on banks (both at the deputy minister level and through the relentless lobbying of Josef Ackermann)?  The presumption among their closest allies is that this is to hide losses – and general government culpability – in the mismanagement of German public banks (Landesbanken).  Why is it reasonable to hold up the entire G20 process (and the BIS, etc), at a technical level, for what is essentially a broad form of political cover-up?
  4. Why have the full results of European bank stress tests never been published?  Is this because of large current and likely future losses on the balance sheets of financial institutions that fall within Mr.

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