FRANKFURT (AFP) – The head of German bank SachsenLB, which was stricken by losses linked to investments in US subprime home loans, has resigned, the bank said on Thursday.
Herbert Suess, 67, chose “according to his own wishes” to relinquish his responsibilities as chief executive on September 15, while another two directors have been sacked, the bank said.
SachsenLB, a state-run regional bank, was bailed out by the German government and then rescued at the weekend by fellow regional bank Landesbank Baden-Wuerttemberg (LBBW).
LBBW agreed to buy SachsenLB, the smallest regional bank in Germany and the only state-run bank in eastern Germany, to prevent it from going bankrupt.
SachsenLB developed severe liquidity problems, meaning it was unable to cover its liabilities, after losing money with investments linked to US subprime home loans.
Subprime loans are mortgages for borrowers with poor credit history and are highly risky.
Banks invested in them through mortgage-backed securities, complicated financial instruments that plummeted in value as increasing numbers of stretched US borrowers defaulted on their home loans.
SachsenLB admitted before the takeover by LBBW that it had to be bailed out to the tune of 17.3 billion euros (23.6 billion dollars) by the national German savings banks because of its US subprime losses.
A rush to pull out cash
“Worried about the stability of mortgage giant Countrywide Financial, depositors crowd branches. In Laguna Niguel, Bill Ashmore drove his Porsche Cayenne to the bank’s office and waited half an hour to cash out $500,000. “It’s got my wife totally freaked out,” he said.
By E. Scott Reckard and Annette Haddad
August 17, 2007
Anxious customers jammed the phone lines and website of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.
Countrywide Financial Corp., the biggest home-loan company in the nation, sought Thursday to assure depositors and the financial industry that both it and its bank were fiscally stable. And federal regulators said they weren’t alarmed by the volume of withdrawals from the bank.”
My definition of “A run on the bank” is:
I withdraw my money and put it in the mattress. I don’t deposit it somewhere else. Does this definition hold water?
