Photo Gallery: Germany's Former Top Banker
Former Deutsche Bank CEO Hilmar Kopper 'Money Needs Laws'
SPIEGEL: Mr. Kopper, to this day, you are still viewed as one of Germany's most accomplished financial professionals. When was the last time you were berated as a banker?
Kopper: Oh, it happens all the time. But sometimes people also ask for explanations. At any rate, I try to grapple with their accusations, even though they are often irrational, full of resentment and almost devoid of any knowledge about the subject. I am an old man and no longer have to worry about offending people. Of course, that doesn't mean that I have become the apologist of my profession. After all, I've been a banker for more than 55 years, and I still like doing it!
SPIEGEL: Then you ought to be worried, because resentment toward your industry now extends into the upper classes.
Kopper: Since when is the upper class a benchmark of judgment? I admit that banks haven't done everything well and correctly. There were excesses, like unnecessary financial products and false incentives. In short, mistakes were made, the kinds of mistakes that have been inherent in every innovation and every bubble from time immemorial, and that emerge when the bubble bursts. Everything has its price.
SPIEGEL: National lawmakers can hardly keep up with the pace of monetary transactions. And there are hardly any international controls.
Kopper: There was a promise of better international regulation. But this promise hasn't been kept, at least not until now. I certainly find fault with that. We mustn't forget that regulators, custodians and rating agencies also bear some responsibility.
SPIEGEL: Many of your active colleagues tend to duck away whenever someone asks for an explanation or even an opinion.
Kopper: I can understand the reluctance of my younger colleagues. The level of discussion is simply too flat. And then they're afraid of being asked the question: What have you yourself done? It resembles the question that my generation still asked its fathers: Where were you in this war?
SPIEGEL: People don't die in the financial crisis ...
Kopper: ... but values do -- in every sense of the word.
SPIEGEL: A letter bomb addressed to your successor, Josef Ackermann, was recently received at Deutsche Bank. That too is an expression of anger.
Kopper: Such actions have also taken place in the past. One shouldn't take this sort of thing so seriously, particularly as the people pulling the strings are apparently always willing to sacrifice the "wrong ones": secretaries, messengers, postal workers. But it also shows where the hatred that has been stirred up can lead. And besides, "the banker" as such doesn't really exist.
SPIEGEL: There's one sitting in front of us.
Kopper: I'm old school, so to speak. Often, when people are berating "the banks," they're really talking about completely different things: derivatives, commodities trading, foreign currency.
SPIEGEL: These are all businesses in which banks are involved.
Kopper: But usually just on behalf of pension funds, very large hedge and sovereign funds and wealthy investors. Never in the history of mankind has there been so much money in circulation, and never before was it possible to trade with it so quickly. And never before has this money used the entire planet as a playing field, as is the case today in the era of globalization. That's the way it is and the way it will remain. There can be no turning back the clock. How shortsighted people must be when they hold bankers responsible for this development!
SPIEGEL: Who do you think is primarily responsible for the crises?
Kopper: We're dealing with multi-causal failure. It didn't just start with the American central bank, the Federal Reserve, which permanently made money cheap after the attacks of Sept. 11, 2011. It was the declared goal of American policy, under Presidents Bill Clinton and George W. Bush, that every American was to own his own home. Many poor people, in particular, were lured in, people who couldn't afford this dream at all. The banks turned this into a huge business, the rating agencies provided incorrect ratings, and many countries -- both the United States and in Europe -- did not have their debt under control before the financial crisis erupted.
SPIEGEL: Do you have any sympathy for the new Occupy movement ?
Kopper: Forgive me for being so direct, but I've hardly heard it utter a single reasonable sentence so far. It's all vague criticism of capitalism, markets and the market economy in general. I'm not interested in political correctness and I'm not about to pretend to have any sympathy for this movement now. It isn't just politicians of all stripes who have been doing this lately. No, I really don't understand the Occupy people.
SPIEGEL: It seems to us that the main problem is that many people don't even understand what the issues are that concern the European Central Bank (ECB), the European Financial Stability Facility (EFSF) and the International Monetary Fund (IMF) in the fight against swaps and bonds, and for bailout funds and leverage.
Kopper: Well, I can easily explain the leverage for increasing the size of the EFSF: What does a mother do when the doorbell rings and the relatives are standing outside? She goes into the kitchen, and you hear the sound of the water she is adding to the soup to make it last longer. That's how leverage works. It makes the soup thinner.
SPIEGEL: Comprehensibility would also create confidence.
Kopper: You know, I still receive a very small pension from the British government. I was a member of various boards of directors there, which meant I was automatically included in the social security system. It comes to about seven pounds a week. And whenever the amount is adjusted, I receive a wonderfully short and clear letter from the British government agency. We have to return to that in all respects. To comprehensibility. Then people will be enthusiastic.
SPIEGEL: There is actually money available to finance goods and services. But nowadays, it often simply generates more money.
Kopper: Whether you like it or not, the goal, everywhere and always, is to turn money into more money. What other purpose do foreign currency reserves have? In the past, they were truly intended to collateralize currencies like the deutsche mark. But today? The Bundesbank's gold is nothing more than a slice of the nation's assets and, at the same time, the basis for speculation. That's why politicians always want to get their hands on it.
SPIEGEL: Every year, real goods and services worth about $70 trillion (€54 trillion) are created worldwide. In the same time period, turnover on the foreign currency markets amounts to $1.007 quadrillion. The virtual world is completely disconnecting itself from reality.
Kopper: Of course this is seen as a discrepancy, which some like to connect to the demand that banks become more involved in the real economy and issue commercial loans. But that is precisely what they do, most of all.
SPIEGEL: Deutsche Bank doesn't take on just any customer.
Kopper: For Deutsche Bank, mid-sized companies start at sales of about €50 million. Everything below that is not considered a mid-sized company, with which this bank can and should waste its time on. That market is for the local savings banks and credit unions.
SPIEGEL: That's the arrogance of the major banks.
Kopper: No, it's the reality. Why would you want to deprive the savings banks of their traditional business? And you're always referring to the plural, to "the German major banks." There's only one, Deutsche Bank, or do you seriously intend to include Commerzbank on the global scale? This, incidentally, is a serious problem for our economy: We have a deficit when it comes to banking, which is why foreign banks often clinch the deals. The customers are giants. Just look at the Chinese sovereign wealth fund, which, with its $3.5 trillion in assets, has accumulated as much money as the debts of Greece, Italy and Portugal combined. The Chinese could easily fix Europe's debt crisis ...
SPIEGEL: ... which they would never do.
Kopper: Of course not. But if the Chinese decide in the morning to buy 10 billion worth of foreign currency and then get out of the market in the afternoon, because they have made a small profit, you have total sales of 20 billion. In our globalized real time, there are unbelievable accumulations of such funds, so much so that I wouldn't even call it capital anymore. These funds are constantly searching for something to do and for returns. And nowadays the funds are only managed by a handful of people, who are usually not working for banks.
SPIEGEL: Where do they work?
Kopper: At hedge funds. At the big sovereign funds. Not to mention pension funds and other vehicles for the accumulation of capital.
SPIEGEL: And you don't think that the scope of all these virtual financial transactions should be limited?
Kopper: How? And where? But you're discussing this in less of a legal sense than in an ethical and moral sense, right?
SPIEGEL: Indeed.
Kopper: That's the difference between us. The virtual world isn't a manifestation of the financial industry alone! And I have no moral arguments to make here, either. If the markets allow such deals to take place -- and that is the case today -- then they do take place.
SPIEGEL: You can't simply ignore morality. Speculation, for example, exacerbates the food supply problem . All of a sudden, food staples threaten to become so expensive that the poorest of the poor in Bangladesh or Africa can no longer afford to buy them -- merely because of the decisions made by a handful of dealers in Chicago or London.
Kopper: Maybe that's true, or maybe it isn't. I haven't read any studies that clearly pointed to a relationship (between these two things). The prices of most commodities recently plunged, despite the fact that alternative energy production using plants is and remains the biggest driver of prices.
SPIEGEL: Speculation can exacerbate the up and down. And these days not even you would still defend the theory that markets always regulate themselves and that, for this reason, nothing can ever go wrong.
Kopper: I've never believed in that. Markets have a compensatory function. This doesn't mean that good behavior on the part of the players is automatically guaranteed. Unfortunately, the hope that people will behave with decency isn't always enough. The players need laws. Money needs laws. And laws are the responsibility of the state. It makes the rules, monitors compliance and imposes sanctions, if necessary.
'I Used to Think the World Was Shaped By Love'
SPIEGEL: Today, for example, you can buy certificates from Commerzbank that speculate over the company's own demise …
Kopper: … and, in the same vein, you can also bet on the outcome of football games. But then it isn't called speculation but Toto. What's the difference?
SPIEGEL: In gambling, it isn't Wall Street gamblers who are holding out their hands, but the state ...
Kopper: ... and that automatically makes it good? In a free society, everyone can do as he pleases, which includes making bets or burning one's money.
SPIEGEL: Playing the lottery doesn't cause serious problems for a country, the way speculative bubbles and bank crises can.
Kopper: I agree. The bad thing was that in the case of the crisis that began in 2007, a few banks were gambling. In Germany it was mainly the state-owned banks. They shouldn't have. Hedge funds, on the other hand, couldn't care less what they bet on. All they care about is their profitability. But this doesn't have to apply in the future.
SPIEGEL: Deutsche Bank also had a flourishing proprietary trading business during the years of the crisis.
Kopper: It's been decreasing for years now. Its share of total volume is very small today and, technically speaking, often unavoidable.
SPIEGEL: You yourself once heralded the change in course for Deutsche Bank -- toward Anglo-American style investment banking. The bank is hooked on this business today.
Kopper: Deutsche Bank, with more than 28 million private customers worldwide, isn't hooked on anything. But, as an integrated business with major international customers, it is very important, even indispensible.
SPIEGEL: There has been much talk of casino capitalism in recent years. We think the comparison is a stretch ...
Kopper: ... and so do I ...
SPIEGEL: ... because a casino is a relatively respectable business with clear rules. These limits don't exist in the financial system.
Kopper: I agree with you completely. But regulation is needed to change this, and it makes the most sense for such regulation to apply to everyone, not just the Germans, the French or the British. And, above all, this regulation must also apply to an area that has been completely unregulated until now: hedge funds. We know neither what they do nor what they own. In contrast, banks are among the most regulated businesses that exist. Nevertheless, that wasn't enough to avert the crisis.
SPIEGEL: Do you even understand today's financial world anymore?
Kopper: Yes, in general. But not in terms of the details, that is, certain technical facets.
SPIEGEL: That could speak less against you than against the markets, which have attained an enormous degree of complexity in next to no time.
Kopper: It certainly attests to the tremendous acceleration of these markets. We can't keep up anymore. Today's traders are in their mid-twenties to early forties. After that, they're either burned out or fed up, because they've had enough.
SPIEGEL: It's a strange world.
Kopper: It's no different than the world of professional soccer. I see this without resentment.
SPIEGEL: In recent years, financial products have increasingly been sold that, in some cases, aren't even understood by those selling them.
Kopper: (Deutsche Bank CEO) Josef Ackermann said a clever thing: It would be nice if the banks would remind themselves that the threat to their reputation is worse than a lost deal. We held the same view in the past. We didn't want to touch certain deals, because they were too precarious, in terms of structure and image, even if we stood to make a lot of money with them. This boundary has shifted more and more. Nowadays you just get yourself the best lawyers, have expert opinions written and make sure you've covered all the legal bases.
SPIEGEL: So morality is an impediment in the financial industry, after all.
Kopper: Morality is always an impediment when it comes to competition and success. But this doesn't meant that isn't very important -- or ought to be -- especially in the financial sector. Money, as it happens, is a particularly precarious affair.
SPIEGEL: Haven't you ever been ashamed to be a banker?
Kopper: Yes, it's happened occasionally.
SPIEGEL: The hearings before the United States Congress are among the most interesting ways of accounting for the role banks played in the crisis. The tone used in many internal bank emails is particularly dismaying. There is much talk of cheating and taking advantage of people.
Kopper: I was also shocked. But I find the same tone everywhere nowadays, unfortunately. I think it has to do with the relative novelty of email as a medium. People say the stupidest things, and then they're surprised to see that their tirades and all that verbal nonsense remains stored on servers for eternity.
SPIEGEL: Is that the way bankers used to talk about their customers and competitors?
Kopper: Certainly not at the top. And as far as other levels go, no one recorded it. I wouldn't absolutely guarantee that disrespectful remarks were never made. But the tone has certainly become more malicious, brutal and hard-edged. People used to write letters to each other, letters in which no one would ever have misbehaved in these ways.
SPIEGEL: (Former Deutsche Bank Chairman) Alfred Herrhausen once said that the question is not whether banks have power, but what they do with it.
Kopper: That's correct.
SPIEGEL: So how does one convince the young generation to put profit into perspective and become aware of its own social responsibility?
Kopper: Most of them do that already. You are referring to a very small group of people in which the Ronaldos of the banking world are to be found.
SPIEGEL: This elite shapes the perception of your entire industry -- where money rules.
Kopper: I don't believe that. In my view, the biggest driving force behind these people, who are often still very young, is the desire to be a big player within their own niche. They are egged on by the recognition of their competitors. But the proportions also have to be set straight: When a bank begins to falter, it's far more often the case that the bad loans are to blame -- not some escapades on the part of young traders.
SPIEGEL: Why is the financial sector so appealing to many young people?
Kopper: Because it's a huge challenge. They have to prove themselves every day, as the smartest, best and fastest in a fast-paced market. They get up in the morning and have nothing -- no patents, no licenses. In other industries, someone might come up with a good invention and live on the proceeds for the next 10 years. Germany is full of such engineers and technicians. They're great people, but nowadays the smartest people seek their challenges in the financial sector.
SPIEGEL: This elite also included the 31-year-old London employee of the major Swiss bank UBS, who gambled away €2.3 billion in derivative transactions this summer.
Kopper: These kinds of people exist here and there. They make bad decisions, and then they hide their mistakes. You can't look into everyone's soul. No security system in the world can prevent someone from occasionally taking off.
SPIEGEL: You too can be accused of being out of touch with reality, but for a different reason. After Jürgen Schneider, the real estate magnate, had declared bankruptcy, you referred to the 50 million deutsche marks he owed tradespeople as "peanuts" ...
Kopper: ... I was merely referring to the American meaning of the term, which is "a relatively small amount of money." And it was, compared with the 5 billion Mr. Schneider had cheated out of his investors. You mustn't forget that the 50 million represented a voluntary payment by Deutsche Bank, which I didn't want to emphasize too strongly.
SPIEGEL: How long did it take to convince you to sit on a truck filled with peanuts for the ad campaign in the Frankfurter Allgemeine Zeitung newspaper?
Kopper: I was very enthusiastic when I received the request, simply because I liked the self-irony of the motif.
SPIEGEL: How close are people to normal life in the mahogany-paneled executive suites at Deutsche Bank in Frankfurt?
Kopper: Perhaps they have trouble operating the ticket machines on commuter trains. But otherwise, the differences between banking executives and normal people aren't that great. As a banker, you have no lack of opportunities to look into the human soul. This entire nation, the entire world, is ultimately running after money. The amount of influence money has on people has always fascinated me. You forget almost everything while in its shadow.
SPIEGEL: Have you lost illusions when it comes to your image of humanity?
Kopper: Completely. I used to think that the world was shaped by love. I'm sorry, but that's nonsense. It's shaped by money. Money, avarice and greed -- these are the three main constants. Why did retirees buy Lehman certificates? Because Aunt Anna said that she had something that was earning 4 percent interest, and suddenly everyone else wanted it. That's when reason is suspended and the herd mentality takes hold. In this context, it's still true that the higher the return, the greater the risk.
SPIEGEL: You're the third of the four children of a West Prussian farmer. Why did you become a banker in the first place?
Kopper: While playing bridge with his friends, my father said: The boy is finished with school, but there's no money to send him to college, because his big brother is already at the university. The bridge players agreed that I should do a bank apprenticeship, because it could never hurt. I really wanted to work in the real economy, and to do something more hands-on. Something to do with engineering. Well, okay.
SPIEGEL: In those days, a banker was still respected. In every village, he was part of the local elite consisting of doctors, teachers and ministers.
Kopper: There was a reason they were called "bank officials." They were needed and respected. But one mustn't forget that a banker is always at risk, the minute he lends money.
'The Market Is Merely a Mirror Being Held Up To' the Political Class
SPIEGEL: How much did you make as an apprentice?
Kopper: I made 54 deutsche marks a month. I was lucky, because I was only 22 when the bank sent me to America as a trainee in 1957. My employer there sent me to Hollywood to see what MGM and the other studios were doing with the money it had lent them. I wasn't overly presentable at the time, because no one really looks fresh after spending two weeks on a Greyhound bus. It was a great experience.
SPIEGEL: Hollywood must have been nice to you.
Kopper: Oh, yeah. After all, I was the representative of the financiers.
SPIEGEL: You met Spencer Tracy and Ernest Hemingway, among others. Does money make people sexy?
Kopper: I can assure you that those gentlemen had no interest at all in me. But money probably does have an erotic component, even though I didn't have any at the time.
SPIEGEL: Why has the image of the banker suffered so much since then?
Kopper: I think the fury is something of a German phenomenon.
SPIEGEL: We disagree. Even in the United States, the home of unbridled capitalism, people are now taking to streets to demonstrate against bankers.
Kopper: The United States isn't my role model. If that was ever the case, it was after World War II, when we were slowly emerging from the Stone Age we had fought ourselves into. But I would neither want to live in America nor be a banker there.
SPIEGEL: Fifteen-trillion dollars in debts, a crumbling infrastructure, high unemployment, food stamps for one in five children ...
Kopper: ... and the Americans still want to spend even more money. I'm horrified when I look at the politics there, with all the backstabbing and squabbling in Washington.
SPIEGEL: Europe isn't any better off.
Kopper: I see a dollar crisis, but not a euro crisis. Europe has a debt problem, whereas the United States also has a problem with its balance of payments.
SPIEGEL: Can the euro still be saved?
Kopper: Of course.
SPIEGEL: How.
Kopper: With a "compassionate heart," as former Chancellor Helmut Schmidt said at the Social Democratic Party (SPD) conference, but also with levelheaded reason. We need both solidarity and stability. (German Chancellor) Angela Merkel is trying to reconcile these things, not with much success at first, as I'm forced to admit. The next step is the most important one: What is doable and can be reasonably asked of the German voter? I have a certain calculated optimism, even if Germany has to be very careful, just like a weightlifter. Our country can indeed lift enormous amounts, but at some point even this giant will be brought to its knees. One can also overdo it while trying to save things, and that's when the lights go off.
SPIEGEL: The markets are driving politics, leaving no doubt as to who is really in charge.
Kopper: I think that's nonsense. Why does the political class refuse to accept that the market is merely a mirror being held up to them: neutral and incorruptible? What do people mean when they say that politicians must gain control over the markets? A planned economy? It makes me laugh. At times, politicians behave the way we did as little children, when we covered our eyes while playing hide-and-seek and yelled: You can't see me!
SPIEGEL: So we should have seen the debt crisis coming?
Kopper: Yes, certainly two or three years earlier. Berlin, Paris, Brussels, the ECB, the IMF, the European Commission, the rating agencies, the banks -- all of us. It's the way it was in East Germany, when no one really recognized how broken it was. Or perhaps no one wanted to see it.
SPIEGEL: Is capitalism undermining the democracy that supports it?
Kopper: Why should it?
SPIEGEL: Governments have been replaced everywhere -- in Spain, Greece, Italy and Portugal. Voters tend to elect people who aren't promising overly drastic austerity measures. But "the markets," for their part, don't like this at all.
Kopper: The markets also don't like it when people do nothing but save their money, but nothing can grow without investments. Citizens vote for their governments, even today. This couldn't be more democratic. The Maastricht Treaty ratified by all member states provided the rules, so that more pressure could be applied to countries that don't have a handle on their budgets. It was legitimate, and it still is legitimate. And now we Germans are seen as the evil ones in the European concert, just because we insist on stability and sticking to the rules -- oh my God! We really have to put up with this.
SPIEGEL: Can there be a new age of modesty?
Kopper: Where should it come from? I can guarantee you that the mistakes that were made will be repeated. At all events, the cycles will become short, the triggers more surprising and the crises even bigger.
SPIEGEL: How do you invest your own money?
Kopper: I have too much in my current account. If I were a speculator, I would have to invest in Greek bonds. But I'm at an age when you invest gingerly and without risk.
SPIEGEL: There are many proverbs that revolve around money. Which one reflects reality? "Money rules the world?"
Kopper: The older I get, the more certain I am that that's true. It isn't amusing. In fact, it's more repulsive than anything else.
SPIEGEL: "Money doesn't make you happy?
Kopper: It makes you independent, at best.
SPIEGEL: "Money doesn't stink?"
Kopper: False. Money can be pretty smelly indeed.
SPIEGEL: Mr. Kopper, we thank you for this interview.
