It was already a terrible week for Germany’s largest bank, when the Italian turmoil sent its stock price below €10 for the first time since the bank’s existential crisis in the fall of 2016, and it just got worse this morning, following reports that the Federal Reserve has designated Deutsche Bank U.S. operations to be “troubled condition” which the WSJ said was a rare censure for a major financial institution and is being reflected in its price this morning, which is now down over 5%, at €9.35, and rapidly approaching the all time low of €8.834 hit in September 2016 when speculation was rife that Germany would bail out Europe’s largest lender.

As the WSJ reports, the Fed’s downgrade took place secretly about a year ago, and until today hasn’t been previously made public.

The “troubled condition” status—one of the lowest designations employed by the Fed—has influenced moves by the bank to reduce risk-taking in areas like trading and lending to customers.

Some additional details on the Fed’s secret rating system known as “CAMELS”

The U.S. system for rating banks is called “CAMELS,” which stands for capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. A bank’s topline rating, from 1 to 5, takes into account all those categories. The best rating is “1.” Troubled banks are rated either “4” or “5.” Scores aren’t made public.

While hardly a surprise for the recidivist criminal bank, the Fed’s special designation means the bank has had to clear decisions about hiring and firing senior U.S. managers with Fed overseers. Even reassigning job duties and making severance payments for certain employees require Fed approval, the WSJ sources said.

This unprecedented scrutiny of DB by the Fed, which comes at a time of great turmoil for the bank whose CEO was recently expelled and which has seen many of its top traders and bankers quietly quit or get poached, has rippled through Deutsche Bank’s relationships with other regulators, including the FDIC., which has pressured the lender to improve controls and oversight.

The Fed downgrade also landed the bank’s FDIC-insured subsidiary, Deutsche Bank Trust Company Americas, on the FDIC’s “Problem Banks” list of at-risk institutions.

The FDIC doesn’t detail the membership of the list, but does say how many banks are on it and the combined value of their assets. The list’s asset total rose by $42.5 billion in the first quarter; Deutsche Bank Trust Company Americas, the bank’s well-capitalized American deposit-taking unit, had $42.1 billion in assets as of March 31, according to regulatory filings.

Well that escalated fast: one month after Bloomberg reported that Deutsche Bank would cut 1,000 jobs in the US, roughly 10% of its total US labor force, as part of new CEO Christian Sewing’s restructuring process, the WSJ this morning writes that executives at the biggest German lender have “zeroed in” on plans to eliminate close to 10,000 jobs, about one in 10 employees, as part of the bank’s epic cost-cutting scramble.

The latest plan, part of a process that has divided senior executives and left investors unconvinced, “would extend into 2019, follows months of thorny debate over how fast and deep job losses should be at the beleaguered German lender.”

So far investors remain unconvinced the plan will work, and as a result the bank’s shares have fallen by nearly a third this year, making DB stock one of the worst performing European stocks, and at its lowest since a crisis of confidence hit the bank in late 2016.

Meanwhile, high-level clashes over staffing and budgets and conflicting opinions from outside investors and bank executives reveal the depth of Deutsche Bank’s continuing struggles.  As the WSJ adds, the bank’s supervisory board and senior executives will confront investors Thursday in Frankfurt at its annual shareholder meeting. They will face a proposal to break up the company and probing questions about last month’s chief executive handoff and the tough choices the lender has to make.

Separately, Bloomberg report that the bank is about to “retreat from a swathe of equities markets across the world, including some on its own doorstep in Europe.”

Germany’s biggest lender, which is expected to announce a range of restructuring measures to coincide with its annual shareholder meeting Thursday, will sharply reduce its presence in the U.S. market, and has also started cutting activity in the Central Europe, Middle East and Africa region, the people said, asking not to be identified discussing private information.

In case it wasn’t clear, it has been a messy year for Deutsche Bank. The April 8 ouster of CEO John Cryan in the middle of his management contract shook employees and appeared botched to some clients and investors.

Things could get messier on Thursday, when Deutsche Bank’s chairman, Paul Achleitner, will face a vote of no-confidence, which could thrust Germany’s biggest bank into outright crisis after years of underperformance and strategic flip-flops.

The shareholder meeting will convene as Deutsche struggles to convince investors that it has a credible strategy, under the leadership of chairman Paul Achleitner and Christian Sewing, the new chief executive he appointed in chaotic circumstances last month.

Among the potential names to replace Achleitner is Philipp Hildebrand, the former chief of the Swiss central bank, who currently heads Blackrock’s business in Europe. He quit the SNB after his wife was embroiled in a major FX insider trading scandal. In other words, Hildebrand should fit right into the “culture” at Deutsche Bank.

Authored by Chris Hamilton via Econimica blog,

The ultimate indicator of personal economic confidence is the determination to perpetuate the species and have children.  The chart below shows annual US births from 1910 through 2017 and it is estimated there were 3.84 million births in 2017, nearly a hundred thousand fewer than in 2016.

The 2017 figure is also nearly a half million fewer than the late 1950’s baby boom era peak and likewise below the subsequent mid 2000’s double peak.  The 2017 figure is also nearly six hundred thousand below the Census estimates provided as recently as 2000 and 2008.

To offer some perspective, the chart below shows annual births versus total US population…despite the total population nearly doubling since 1957, the US had 11% fewer children in 2017 than 1957…or 2007.

More poignantly, below is the US childbearing population (those aged 15 to 45 years old)…the red columns represent the annual change while the blue line is the total 15 to 45 year old population.  As can be plainly seen, the growth of the childbearing cohort represented by the “baby boom” on the left dwarfed the growth represented by “millennials”, on the right.  Of course, on a relative basis (%), the millennials represent less than a third the annual quantity of growth than the boomers offered…and millennials high levels of education driven indebtedness and poor quality of employment, etc. mean the quality of growth they represent is even lower than their numbers would indicate.

A last note regarding millennials, their estimated “growth” was never organic (as births essentially never exceeded those during the “boomer” period) and instead was almost entirely dependent on estimates of continued high rates of immigration…the same immigration that has dramatically slowed since the early 2000’s.  Chart below shows the sources of 15 to 64 year old population growth (declining births vs. immigration…annual average per 5 year periods) since 1970.  Given this, there is a high probability that the size of the millennials significantly undershoots estimates.

Births continue to decline since 2007 (represented by columns in the graph below) while the Census birth estimates continue to tumble (lines below represent select Census Est.’s from 2000 through 2017).  The Census estimates for ’00 and ’08 (essentially identical) anticipated annual births would rise to 5.7 million by 2050 (and continue rising thereafter).  However, after the ’09 GFC and ’10 Decennial Census, the Census Bureau began dramatically reducing their present and future estimates for growth.  Nevertheless, each reduction was still far too optimistic.

Total births continue to surprise to the downside and significantly lower estimates are needed if the Census forecasts are going to match reality.  I offer a more realistic “guesstimate” (dark blue line) based on the ongoing changes to the childbearing population and current trends.  Even immigrants quickly norm to the lower fertility rates once in the nation.  Simply put, the conditions for family formation and child rearing continue to deteriorate.  The US isn’t alone, detailed (HERE), and the situation within the US is dire detailed (HERE), (HERE), and (HERE) but the question remains.  Why are birth rates and total births declining amid a growing population and record levels of wealth?

The chart below shows the fast decelerating US fertility rate versus record Household Net Worth.  The previous peaks in HHNW saw corresponding upticks in the fertility rate, but not this time.

Unfortunately, since ’07, nearly all the benefits of this record “wealth” creation are being accrued by a fraction of Americans.  The federal government and Federal Reserve programs have benefited asset holders while penalizing the working class with fast rising costs of living (record rents as a % of income, record insurance, higher education costs, reduction/elimination of pensions and job related benefits, etc. etc.) absent the higher wages with which to pay for these.  It appears the present and future generations opportunities are being sacrificed to maintain and further a select group in the here and now.

The chart below details the growth in household net worth by income levels from ’07 through ’16.  Those that have significant assets have been further enriched…those without have been punished (and as the saying goes, “the beatings will continue until morale improves“).

The continuation of the present policies will only further grossly enrich a shrinking minority while continue to penalize those of childbearing age (among others).  This will only further push the birth rate into negative territory (well below replacement level).  The Fed’s inequitable cure is essentially saving the elderly patient at the expense of the present and future of the patients offspring.  The merit of an economic system which results in the childbearing populace unable and/or unwilling to perpetuate the species is sorely in need of reconsideration and reconstruction.