WEST LB (Westdeutsche Landesbank)

WestLB -> Anti-Stress-Ball, gifted in 2021.

WestLB was a Landesbank: a state-owned wholesale bank, owned by the German state of North Rhine-Westphalia and the regional savings banks. In plain terms, it was owned by the taxpayer. Do hold on to that fact. It becomes funny later – in the way that a root canal is funny.

The pedigree is genuinely wonderful. WestLB traces its lineage to an 1818 reparations payment of 160,000 taler from, of all benefactors, the Swedish government, as compensation for damage done in the Napoleonic Wars. From this charming seed grew “the first-ever Landesbank.” Its Rhineland predecessor then proceeded to fail spectacularly in the European banking crisis of 1931. So blowing up was, let us say, in the family.

The ambition never matched the temperament. This provincial public bank wanted to play in the same league as Deutsche, Dresdner and Commerzbank, and by 1976 it was indeed Germany’s third-largest lender. It also nurtured a recurring hobby: losing money in ways that required firing people. In 1973 it dropped more than $150 million on unauthorised currency speculation. In 1978 its CEO was sacked and then charged with fraud (later cleared). In 2001 some DM 15 billion of Trans World Group money was found washing through its accounts. A real institution.

The London glamour years. From 1998 an American banker the British press adored as a “media babe,” Robin Saunders, ran WestLB’s Principal Finance Group and financed a list that reads like a pub quiz: a bond to refinance Bernie Ecclestone’s Formula One business, the redevelopment of Wembley Stadium, and a humble British television-rental company called Boxclever. Boxclever, alas, marched into administration and left WestLB with a hole running from several hundred million euros to, by some counts, north of a billion. Frau Saunders departed in 2004 with her reputation intact; the balance sheet was less fortunate.

Now, the Volkswagen part – since you asked specifically. Around 2007 WestLB’s proprietary desk placed a clever-clever bet on German car stocks: short Volkswagen ordinary shares, long the preferred shares, wagering the gap between the two would narrow. The gap did the precise opposite. The resulting loss – roughly €600 million – cost CEO Thomas Fischer his job. And here is the punchline that no screenwriter would dare: WestLB was an early casualty of the very VW ordinary-share dynamic that, in October 2008, produced the greatest short squeeze in financial history – when VW briefly touched €1,005 and became, for one delirious afternoon, the most valuable company on Earth. WestLB got squeezed by Volkswagen a full year before it was fashionable. Pioneers, really.

Then came 2008 in earnest: structured credit, the toxic confetti that every German Landesbank somehow owned by the bin-bag. A €5 billion guarantee in February 2008. Then, in November 2009, €85 billion of problem assets shovelled into a “bad bank” named, with magnificent bureaucratic poetry, the Erste Abwicklungsanstalt – even the bad bank had a name like a tax form. Total state aid: around €17 billion. The European Commission, distinctly unamused, ordered the whole thing broken up. On 30 June 2012, WestLB ceased to exist.

And the grand finale: Cum-Ex. WestLB was among the banks linked to cum-ex and cum-cum dividend-stripping – the scheme in which the state cheerfully refunds a dividend tax it collected only once, or never. Read that slowly: a bank owned by the state, allegedly helping clients reclaim a tax the state never actually received.

Prosecutors later raided its successor, Portigon, over exactly these trades. So the circle closes: the taxpayer funded WestLB; WestLB lost the taxpayer’s money; the taxpayer bailed it out; and, per the investigators, the taxpayer may also have been billed a third time on the way out via cum-ex. A perfect Möbius strip of public money.