Weber and Sanio fight back on HRE rescue

Axel Weber, the president of the Bundesbank, and Jochen Sanio, the president of BaFin, the German banking regulator, issued a joint statement on Sunday, against the allegations made by two members of the German Parliament that public was misled about the saving of Hypo Real Estate, a big German mortgage lender.

The statement said that Weber and Jochen "took notice of the allegations made by Axel Troost and Volker Wissing with astonishment." The officials argued the suggestion that shareholders and the public were purposely misled lacked any foundation.

Hypo Real Estate's financial difficulties come to the fore in September last year. On 29 September the bank said that a consortium of financial institutions would provide loan of €45 million ($63.6 billion) - which it described as "of sufficient amount". This proved false when, only a few days later the bank required another €15 million to survive. The lender ultimately required some €102 billion in loans and was finally taken over by the government in June this year.

Troost and Wissing have argued the wording of Hypo Real Estate's statement - which a Munich court has since found to have been willingly misleading - was provided to the bank's executives by Weber and Sanio. The parliamentarians said that Sanio and Weber must have known that the risks were higher at the time and therefore contributed to misleading the public.

The state had to buy the Hypo Real Estate to avoid "an end of the world financial system," Sanio said during a parliamentary hearing in July. Sanio added that it would have been impossible for private banks to save the lender on their own.

The parliamentary hearings into the take over are continuing this week, with Peer Steinbruck, the German minister of finance, scheduled to appear before the committee.