The Bill Nobody Draws Up

Since 2008 the federal government, the states and taxpayers have rescued banks. What it cost, nobody knows exactly to this day, and the federal government does not want to know. We have assembled the bill from official figures.

I. The bill nobody draws up

In September 2018 the Greens asked in the Bundestag for an overall balance of the bank rescues. The federal government replied that an overall balance would only be possible “after the conclusion of all support measures”. They have not been concluded to this day: the wind-down agencies of Hypo Real Estate and WestLB are still at work, and the federal rescue fund has not yet settled its accounts.

The same answer states what the federal government spent on examining the largest banking crisis in the history of the Federal Republic. It names two paid reports on the causes, one from the German Economic Institute for 55,570.62 euros, one from the DIW for 52,428.57 euros, together around 108,000 euros. The rescue fund alone has an uncovered deficit of 21.1 billion euros.

The bill can nevertheless be drawn up, from the federal government’s answers, the accounts of the Federal Finance Agency, the reports of the state audit courts and the figures of the states.

II. Who was rescued and who paid

In October 2008 the Bundestag set up a rescue fund of 480 billion euros within a week. At the peak, 168 billion in guarantees and 29 billion in capital were drawn.

Where the banks survived, the state had itself paid: 0.5 to 2.5 per cent a year for guarantees, 9 to 10 per cent interest on silent participations. Commerzbank alone paid 1.25 billion euros in interest. Where the state took on the entire risk, however, the losses stayed with it.

Hypo Real Estate shows this most clearly. In 2008 a consortium of private banks and insurers provided it with 30 billion euros, guaranteed by the federal government and paid interest above the market rate. By the end of 2009 it had received the 30 billion back in full. The state was left with losses of more than 17 billion euros: 7.6 billion on its capital, 9.3 billion in loss compensation to the bad bank. It is like a guarantee within a family: the bank gets its money back with interest, and the uncle who stood surety pays for the damage.

At IKB, the state-owned KfW lost 8.1 billion euros and the federal government 1.2 billion. In October 2008 the bank was sold for around 137 million euros to the US financial investor Lone Star. Who won on the other side, the federal government did not want to know. Asked about the gains and losses of the other parties involved, it replied that it had no information.

III. The politicians’ banks

Most of the damage arose not at the private banks but at those that already belonged to politics before the crisis. The Munich finance professor Christoph Kaserer estimated in 2010 that around 80 per cent of the direct costs fell on the state-owned Landesbanken and IKB. Ministers and state politicians sat on their supervisory boards.

HSH Nordbank cost Hamburg and Schleswig-Holstein, by their own estimate, 10.8 to 14 billion euros; in 2018 it was sold to financial investors for 1.05 billion. For the break-up of WestLB, North Rhine-Westphalia’s finance minister put the cost to the public sector in 2012 at around 18 billion euros, about half of it for the state. Saxony paid 1.86 billion euros in loss compensation for Sachsen LB by the end of 2017. Bavaria and Baden-Württemberg, by contrast, earned money on their guarantees for BayernLB and LBBW, and their capital remains in the banks as ownership.

In fairness this must be said: not every Landesbank was a grave for taxpayers’ money. The losses are concentrated in a few institutions, but there they are enormous.

IV. The case of NORD/LB

NORD/LB is the only Landesbank to have been rescued twice. Even before 2019, according to the state audit court, Lower Saxony had spent around 3 billion euros on a share of the bank’s capital with a nominal value of 955 million; 1.9 billion of that has since been written off.

Then came the shipping loans, at times more than 20 billion euros, a tenth of the balance sheet. In 2016 and 2018 the bank lost more than 4 billion euros in total. In December 2019 came the second rescue, presented as 3.6 billion euros. In fact Lower Saxony took on guarantees and sureties of around 6.5 billion gross.

Finance minister Reinhold Hilbers promised the state parliament: no taxpayers’ money. The report of the state audit court shows what that meant. The capital was not provided by the state budget but by a state-owned company, Niedersachsen Invest GmbH, and the state guarantees it the amount including interest and costs. So the sum does not appear as expenditure in the budget, but the risk remains with the state. It was to be paid for out of the bank’s future dividends.

Today NORD/LB is profitable again, with 309 million euros in the first half of 2026. The guarantees for the bad shipping and aircraft loans have even brought the state almost 300 million euros in fees so far, against only 9 million in payments. But no dividend has been paid to this day.

To get one, the state needs a majority of more than 80 per cent. It therefore wants to buy the savings banks’ stake for around 757 million euros, financed by borrowing through a supplementary budget. At the end of September 2026 the savings banks declined for the time being; some want more money.

In 2020 the state audit court had expressly warned against yielding to “pressure from third parties for financial accommodation” unless the state gained a secure advantage in return. Whether that case has now arisen is for the state parliament to answer. Its most recent briefing on the matter was held in closed session.

V. What the bill explains and what it does not

Adding up the documented direct losses, the rescue fund’s deficit, IKB, HSH Nordbank, North Rhine-Westphalia’s share of WestLB and Sachsen LB, one arrives at around 52 to 55 billion euros.

That is a lot of money, but measured against public debt of 2.84 trillion euros it is around two per cent. The direct bill does not explain the public debt. The larger costs lie in consequences that cannot be cleanly attributed: the recession of 2009, the stimulus programmes, the tax shortfalls, the interest on the rescue loans over fifteen years.

What the bill does explain is a pattern. The banks’ profits remained private, their losses became public. The euro rescue shows the same on a larger scale. According to a study by ESMT Berlin, less than five per cent of the 216 billion euros for Greece went into the Greek state budget. The rest serviced old debts and interest, rescued banks and compensated private creditors.

VI. What follows

A control engineer would say: negative feedback is missing here. Whoever takes a risk must feel the loss, otherwise they will take it again. The bank rescues built in the opposite: whoever is big enough gets rescued, and whoever rescues pays. Since 2016 the European Union has had rules under which owners and creditors are liable first when a bank fails. Whether they will withstand the pressure to prevent a failure when it matters has not been tested.

Before such negative feedback can be built in, one has to measure. A bill that nobody draws up is a sensor that has deliberately been disconnected. The least would be a complete, public balance of all rescues, updated every year. It would be cheaper than any further rescue decided without it.

Further reading: Stupid German Money · The Primacy of Politics · Must States Go Into Debt? · Münchhausen’s Heirs