17/09/2008

Dept. of "D'oh!"

It's hard to find words for this:
The German Finance Ministry declared itself shocked -- shocked! -- on Wednesday at the news that a state lending bank, KfW, had transferred €300 million ($426 million) to Lehman Brothers in New York on Monday, just after the investment bank collapsed.

[...]

The trouble is, KfW is overseen by the Finance Ministry, among other elements of the German government, and the country's finance minister, Peer Steinbr├╝ck, holds ultimate responsibility for the bank's health.

[...]

The money transfer between KfW and Lehman was called an erroneous swap -- a swap being a derivative agreement between two parties to exchange one stream of cash flow for another.
That's the only English-language source I could quickly find, but it's not very clear. Judging from what I read and heard elsewhere, here's what happened: A KfW computer executed a preprogrammed command to send 300 million euros to Lehmann Brothers, who in turn would have been obliged to return an appropriate amount of US dollars. Problem: Lehmann Brothers is bankrupt. Hence: No money will come back. In other words, KfW flushed 300 million down the toilet. All of which is taxpayer money.

Oh, well...

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