Davids Medienkritik

One of our longest standing guests – Helian – has started his own blog – Helian Unbound. Topics range from politics to foreign policy to cold fusion. Check it out.

German politics and the German media have largely blamed the U.S. for the current financial crisis. Germany’s cherished “social market” policies, so the unified chorus, would have never produced the reckless behavior of banks witnessed in the country of profit maximization, the U.S. In particular, German regulatory bodies and rules – according to the saga – would not have allowed German banks to invest in toxic assets. So, why oh why didn’t the U.S. follow Germany’s admirable policies?

This WSJ article tells a slightly different story. German politics blew it big time.

May 29, 2009

German Regulator Warned of Hypo Bank Problems Before Bailout

BERLIN — Germany’s financial regulator warned of serious problems  Hypo Real Estate Holding AG six months before the lender was rescued in a massive bailout, but the regulator lacked powers to act and the government ignored its warnings, according to documents viewed by The Wall Street Journal. (…)

For months, Germany has lectured the U.S. and others on the need for stricter regulation of financial markets, holding itself up as a model. The German parliament probe into the €102 billion ($142.6 billion) rescue of Munich-based Hypo, however, suggests Germany struggled as much as the U.S. or Britain to control the risks the country’s banks were taking.

Hypo’s funding problems and huge losses on complex securities make it the worst of Germany’s problem banks, though it is one of many. German banks could face total losses in the current financial crisis of €200 billion to €300 billion, according to several estimates, of which only around €100 billion has been written down. (…)

Overall, banks in Western Europe could lose about $1.4 trillion in this crisis, more than expected losses in the U.S. banking system, according to the International Monetary Fund. (emphasis added)

Finance Minister Peer Steinbrück, who has repeatedly said the “center of gravity” of the global financial crisis lies in the U.S., earlier this month rejected publishing stress tests on German banks, saying it could undermine confidence in the banking system.

A Finance Ministry spokesman said Wednesday that top officials including Mr. Steinbrück were aware of problems in capital and banking markets in 2008, but had no specific indications that Hypo was in difficulty at that time. The failure of Lehman Brothers Holdings Inc. in the U.S. last September was the event that pushed Hypo toward insolvency, the spokesman said.

However, documents produced by the German parliament investigation show that on March 20, 2008 — months before Lehman’s collapse — financial-markets regulator Bafin passed on to the German Finance Ministry a report Bafin had requested from the Bundesbank on Hypo’s funding.

The Bundesbank’s report, which included a special audit of Hypo’s Dublin-based Depfa Bank PLC unit, raised an alarm about Hypo’s massive short-term borrowing needs, as well as its risk management. The report also said that Hypo’s compliance with key banking regulations on managing liquidity and other market risks “must be seen as nonexistent.”

The Finance Ministry in November told parliament in a letter that an unnamed senior Finance Ministry official to whom the March report on Hypo was addressed never saw it, because he was on vacation. It was reviewed by lower-ranking officials, and when he returned to work, the report had been filed away, the letter said. The Finance Ministry declined to comment.

Avoiding transparency and public scrutiny at all costs is a major concern of German politicians, since the results might “undermine confidence” in the system.

Anyway, the U.S. is the culprit, so why ask silly questions about German faults… Also, an American investor is going to lose his investment, which adds a bright spot to the story:

In April, a month after the Finance Ministry had received the preliminary audit report with its damning verdict on Hypo’s risk management, a group of investors led by U.S. financier J.C. Flowers announced their intention of buying a 24.9% stake in Hypo, which they followed through on.

Those investors now stand to lose most of their investment, as the government plans to fully nationalize Hypo as a fraction of its former value.

Perception and reality are not always clear in the media world. That is particularly true when supposedly trustworthy media sources misreport (or simply distort) the most basic facts. Case in point – Tagesspiegel’s recent coverage of statements made by President Barack Obama on Afghanistan in a recent New York Times interview. Here’s what Obama said to the Times:

“Q. Mr. President, we need to turn it to foreign policy. I know we have a review going on right now about Afghanistan policy, but right now can you tell us, are we winning in Afghanistan?

A. No. I think that we are – we are doing an extraordinary job, or let me say it this way: Our troops are doing an extraordinary job in a very difficult situation. But you’ve seen conditions deteriorate over the last couple of years. The Taliban is bolder than it was. I think the – in the southern regions of the country, you’re seeing them attack in ways that we have not seen previously. The national government still has not gained the confidence of the Afghan people. And so it’s going to be critical for us to not only, get through these national elections to stabilize the security situation, but we’ve got to recast our policy so that our military, diplomatic and development goals are all aligned to ensure that al Qaeda and extremists that would do us harm don’t have the kinds of safe havens that allow them to operate.”

Obama is not willing to tell the New York Times that the United States is winning in Afghanistan. While it is debatable whether Obama is saying the United States is losing or not – he is clearly not saying the war cannot be won or is hopeless.

Tagesspiegel: Obama Says the War Can’t Be Won

Here is how the above was interpreted in a Sunday article on Tagesspiegel online:

“War in Afghanistan Hopeless: Obama Willing to Talk to Moderate Taliban

Barack Obama indicated a willingness to have talks with the Taliban in an interview. The reason: The USA could not win the war in Afghanistan. Afghanistan’s President Hamid Karsai welcomed the announcement.

WASHINGTON – US President Barack Obama displayed openness to negotiations with moderate Taliban in Afghanistan and admitted that the USA would not win the war there. Obama told the “New York Times” Sunday edition that the situation in Afghanistan has further deteriorated in the past years. Afghan President Hamid Karsai welcomed the announcement of possible negotiations.”

Obviously, Obama’s statement has been warped into something he did not say. He clearly never said the war could or would not be won – but simply refused to say the U.S. was winning the conflict.

The piece concludes by declaring the war in Afghanistan “hopeless.” This conclusion is supported by what the paper calls “expert opinion.” In this case, the opinion is that of a single individual – British officer Sebastian Morley – who clearly supports Tagesspiegel’s anti-war editorial line. No other “experts” are presented to challenge Morley’s opinion or offer another, less pessimistic view that Afghanistan is anything but completely doomed. (And yes – more optimistic opinions exist in abundance.)

Clearly, the departure of President Bush has not cured German media of its shoddy, biased and often inaccurate reporting on the United States. The Tagesspiegel’s coverage sounds more like opinionated propaganda than news. The German public deserves better…

UPDATE: The lead front-page article in the paper edition of “Die Welt” for March 9 is essentially a carbon copy of the Tagesspiegel piece. The headline offered the same false claim that Obama had said the war in Afghanistan could not be won. (Are we missing something – did Obama ever unequivocally say that the conflict in Afghanistan could not be won???) Why would Obama send an additional 17,000 troops to Afghanistan and call on allies to contribute to the effort if he believed the cause to be futile and already lost? The Welt/Tagesspiegel headlines defy basic logic and can only be characterized as journalistic malpractice…