Studio Guest - Michael Heise, Chief Economist, Allianz Group

This week's studio guest is Michael Heise, Chief Economist, Allianz Group. We talk with him about the international financial crisis. DW-TV: Mr. Heise, how is the financial crisis affecting you? Can you still sleep at night? Michael Heise: Well the sleep is not quite as deep as it usually is, but the days are very turbulent. So you do get a little bit sleep at night. DW-TV: With Lehman Brothers going bust and Bank of America taking over Merrill Lynch, two of the world's major investment banks have fallen victim to the crisis. After all we've seen recently, was this development surprising? Michael Heise: It's not actually a surprise but it does show very clearly the dimension of the financial markets' problem. So it did of course shock the markets when it actually happened. These two companies were icons of the financial boom that led to some exaggerations, some excesses, that are now being corrected. DW-TV: But what exactly comes as a suprise - you just said that the companies were icons, but no one came to their rescue, especially in the case of Lehmann Brothers. Why didn't the US government step in and help out? Michael Heise: That wasn't directly expected, that the government failed to step in, but I think it is sensible. We cannot find a solution if we actually keep all the capacity in the banking markets and try to push it through. There is massive overcapacity, there is massive excess on balance sheets, on indebtedness of banks and financial institutions, which has to come down. So in the end I think the government decision is right, the government will of course find ways to prevent systemic risk for other companies. DW-TV: What's the situation like in Europe? Can banks here be trusted? Michael Heise: Yes, there is reason to trust European banks even if they are not immune to such shocks and earthquakes on international markets. But the European banking system is, by and large, quite solid. Banks are more in the traditional business, not that strongly in investment banking, and they have a refinancing base which is quite stable. A lot of client deposits and long term capital market financing which makes them rather stable. DW-TV Short and sweet - once the financial crisis is over, what will the financial world look like? Michael Heise: We will have a completely new scale and list of companies dominating world markets. We will have consolidation on different fronts and we will have different models of investment banking than previously. Interview: Monica Jones

DW-World | September 16, 2008

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