Hypo Successor

Germany’s Lehman Gets Another Chance

HRE-DDP
The rainy days could be coming to an end for HRE, but at what cost?
  • Why it matters

    Why it matters

    The sale of state-owned bank PBB will be the last chapter in the saga of Hypo Real Estate (HRE), which was bailed out in 2008.

  • Facts

    Facts

    • Hypo Real Estate, or HRE, was bailed out by the German government in 2008 for €19.1 billion.
    • Deutsche Pfandbriefbank, or PBB, was formed from the liquidated assets of HRE.
    • Assuming a sale of PBB between €2 billion and €3 billion, the HRE bailout will have cost each German citizen at least €199.
  • Audio

    Audio

  • Pdf

It was just after Lehman Brothers went bust. Josef Ackermann, then the chief executive of Deutsche Bank, Germany’s largest financial firm and a major player in the investment banking world, was trying to avert the global panic spreading to his home turf.

Mr. Ackermann called Chancellor Angela Merkel at around midnight on Monday, September 29, 2008, not for a bailout of his own bank but to convince her to rescue the German mortgage lender Hypo Real Estate, or HRE, which had suddenly found itself shut out of capital markets and was sinking fast.

It would become Germany’s costliest bailout of the 2008 financial crisis. Up to today, the German government has invested €19.1 billion, including €7.7 billion in a capital injection, into the failed mortgage lender, which has been split into three parts. While Germany may not have been the country worst affected by the financial crisis, its taxpayers were still forced to cough up tens of billions to keep the system afloat.

Six and a half years later, the final chapter of the drama surrounding the mortgage bank is now set to unfold. The best remaining part of the bank is expected to be privatized or taken public by the end of the year, HRE announced on Tuesday.

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