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Dark Towers – David Enrich’s Best-Seller About Deutsche Bank And Donald Trump


In his best-selling book Dark Towers, David Enrich, finance editor at The New York Times, chronicles the complicated history of Deutsche Bank and its entanglement with Donald Trump. Reviewing Dark Towers, Roger Lowenstein writes, 

"Enrich’s most tantalizing nugget is that in the summer of 2016, Jared Kushner’s real estate company (which received lavish financing from Deutsche) was moving money to various Russians. A bank compliance officer filed a “suspicious activity report,” but the report was quashed and she was fired. The suggestion that maybe the money was payback for Russian campaign meddling isn’t one that Enrich can prove. Similarly, we will have to wait to see if Deutsche can recover from years of banking malpractice that destroyed its capital and wiped out 95 percent of its stock price. In the meantime, Enrich has given us a thorough, clearly written and generally levelheaded account of a bank that lost its way."


From the book DARK TOWERS: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction by David Enrich. Copyright © 2020 by David Enrich. From Custom House, a line of books from William Morrow/HarperCollins Publishers. Reprinted by permission.

In 2010, Deutsche hired a young man named Eric Ben-Artzi to work in its risk-management group, with a specific focus on its holdings of hard-to-value derivatives. Ben-Artzi had grown up in Israel in a family full of big, stubborn personalities. His grandfathers fought to secure Israel’s independence. One of his uncles was a paratrooper killed in action. Another uncle was Benjamin Netanyahu, the once and future prime minister. Ben- Artzi’s brother had become Israel’s most famous, or infamous, refusenik—a conscientious objector who was locked up for shirking his mandatory conscription in Israel’s armed forces. Less dramatically, Eric became a mathematician and computer programmer. Like so many others with those qualifications, he had drifted into banking, lured by the money and the challenges of solving complex financial riddles. But after a spell at Goldman Sachs, he discovered that he didn’t have the right constitution for Wall Street. The way he saw it, he wasn’t aggressive enough to be a salesman and wasn’t greedy enough to be a banker. His goal was to ease into academia, and he figured the Deutsche gig— with a heavy emphasis on theoretical research about how to determine the value of derivatives—was a step in the right direction. He also figured a giant international bank knew what it was doing.

Ben-Artzi’s job consisted in part of using Microsoft Excel to build models to check the valuation of derivatives and to see how they would fare in various scenarios, including once-in-a-millennium financial storms. Ben-Artzi quickly realized the bank’s clunky systems produced fuzzy, imprecise results. One of the biggest problems was that the trades he was plugging into Excel were leveraged—meaning the traders had made them using borrowed money, a tactic that could increase their profitability but also made them much riskier—but the numbers he had been given didn’t account for the financial consequences of that leverage. In other words, they were greatly underestimating the risk involved in the transactions. At first Ben-Artzi gave the bank the benefit of the doubt—presumably this was the result of sloppiness, not fraud, and the bank’s higher-ups didn’t realize how inadequate their models were. Within a few weeks, though, he had asked enough questions and received enough stonewalling to conclude that executives didn’t want to know why the models were wrong; they just wanted results that would confirm the wisdom of the present course. When he flagged the leverage problem to his superiors, he was told not to ask so many questions. When he persisted, a superior marched over to his desk and shouted at him to stop.

Like his relatives, Ben-Artzi was stubborn, and he didn’t stop. The more he dug, the more concerned he became. Trades that the bank was valuing in the billions of dollars appeared to be basically worthless. This did not look like an accident. The bank appeared to have been systematically inflating the value of tens of billions of dollars of derivatives. This meant that Deutsche’s much-touted resilience during the financial crisis had been illusory, the product of bogus accounting. That was so stunning that Ben-Artzi initially doubted it could be true.

Soon his doubts faded. The risk department at the time was run by Hugo Bänziger, the former tank commander. Shortly after Ben-Artzi joined Deutsche, Bänziger held a town hall meeting for employees in the basement of 60 Wall Street. When a senior risk manager asked about how well the bank was coping with all of the government authorities examining Deutsche, Bänziger derided the “fucking regulators.” Ben-Artzi wondered whether this was a normal attitude at Deutsche—it certainly wasn’t how Goldman had operated. The answer came a few months later, when Ben-Artzi attended a bank retreat at a hotel in Rome. This time another senior risk manager gave a talk about how employees should craft their explanations about risk to suit different audiences. If they were talking to a regulator, for example, they should play down the amount of risk involved. Sitting in the heavily air-conditioned conference room, Ben-Artzi and his colleagues exchanged nervous glances as the executive counseled them on how to pull the wool over the authorities’ eyes. The executive wrapped up his presentation on an ominous note: If risk managers didn’t let traders take chances, he warned, the bank would have to shrink, and that would mean fewer risk managers would have jobs. To Ben-Artzi and his dumbfounded colleagues, it sounded like a threat: Play ball, or risk losing your job.

Ben-Artzi had seen enough. It was time to follow his brother’s lead; he had to stand up for his principles. He dialed an internal bank hotline to blow the whistle on what he regarded as serious misconduct involving how the bank was valuing its derivatives—the fraud was so vast, he and some colleagues believed, that Deutsche would have been insolvent during the financial crisis if it had come clean about its assets. Worried that Deutsche might point the finger at him for the wrongdoing he was revealing, he also lodged a complaint with the Securities and Exchange Commission. Soon Deutsche barred Ben-Artzi from any further examination of the bank’s derivatives and, not long after, fired him. Another employee who similarly warned the SEC that Deutsche had hidden crippling losses was pushed aside, too. Deutsche was sweeping its plentiful problems under an enormous carpet.


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Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

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