Deutsche Bank flew and fell. Some paid a high price

In 2005, Deutsche Bank, then a powerhouse in the selling of risky derivatives on a global scale, was minting money.

To mark the moment, the bank's profit engine - its global markets division - commissioned a book about itself. The remembrance would celebrate how Deutsche Bank, once a sleepy lender to German car companies, had transformed itself in just 10 years into a force in financial engineering, selling interest-rate swaps, credit derivatives and opaque tax-slashing investment vehicles to the world's wealthy elite.

In the view of one senior executive, it all came down to masterly salesmanship by a single man, Anshu Jain, the chief promoter of the bank's hottest product: risk.

"The size just kept mounting and mounting," this person marvelled in a passage in the book, referring to the growing demand for some of Deutsche's raciest fare. And it was Jain, the bank's eventual leader, who "dramatically accelerated that delivery of complex structures to the broader client base."

Today, these words read more like an epitaph than a commemoration. On December 22, the bank agreed to pay $7.2 billion to settle a claim with the Justice Department that it pushed toxic mortgages on investors in the years leading up to the American housing bust.

The fine was one of the last - and among the stiffest - penalties imposed upon global investment banks by the Obama administration for their role in the financial crisis. And it was also a fitting coda to a turbulent 21-year run by the trading and banking unit at Deutsche that was inspired by three derivative specialists who had been poached from Wall Street years earlier.

In addition to Jain, they included Edson Mitchell, a charismatic builder of businesses at Merrill Lynch who, in 1995, was given a mandate by Deutsche to create a world-class investment bank in London and spare no expense in doing so.

Mitchell recruited two colleagues from Merrill to help him in his task. William S Broeksmit, a derivatives trader with a risk manager's nose for spotting financial dangers, was one. And Jain, then just coming into his own as a purveyor of the exotic to hedge funds around the world, joined him.

Today, two of these three men are dead.

Mitchell died in a plane crash in 2000 at age 47. Broeksmit committed suicide in 2014 at 58.

As for the 53-year-old Jain, his carefully crafted plan to finish what his mentor, Mitchell, started at Deutsche Bank has ended in disappointment.

In the years since the financial crisis, many investment banks have had to pay significant amounts to atone for their various sins. And while the sum of Deutsche's fines is in the middle of the pack, the bank has been drawn into some of finance's furthest frontiers when it comes to the pursuit of profit. Deutsche has been a primary offender in two of the biggest banking scandals of the past decade: promoting toxic mortgages to unwitting investors and manipulating for profit the main lending rate for banks in London. In the process, it has agreed to pay over $9 billion in fines and consumer relief. The bank has sold tax-reduction products to hedge funds, and is alleged to have helped Russian investors illegally move money overseas.

This is also a bank that marketed complex derivatives to Europe's sickliest bank, Monte dei Paschi in Italy. And it is one of the largest lenders to Donald J Trump, having extended roughly $300 million in loans to the president-elect's businesses. Analysts calculate that of the 20 billion euros in profits that Deutsche's trading and banking unit accumulated since 1995, as much as 15 billion euros will ultimately be returned to regulators via fines and penalties. Of course, not all of this lands in the lap of Mitchell - and more recently, Jain.

The investment bank they created remains a power in bond and foreign currency trading worldwide. And from the beginning, it was overseen by a strong-willed German board that knew well the risks and rewards that came with such a business.

It is also the case that when Jain became co-chief executive of Deutsche in 2012, one of his first priorities was lowering the bank's risk, which he did by unloading opaque, hard-to-trade assets. In spring 2015, Jain put in place his own plan for reforming the bank, which his CEO successor, John M Cryan, has not entirely abandoned.

That said, Cryan has made it clear that his Deutsche Bank will be markedly different from Jain's. Since taking over last year, Cryan has preached simplicity, less risk, better internal controls and reduced reliance on derivatives. As for the investment bank he inherited from Jain, he has said that he is committed to it but that it will be a very different institution under him.

Through spokesmen, Jain and Deutsche Bank declined to comment.

Following Mr. Trump's election, Deutsche's stock has been on a tear, up over 30 percent on the hope that the combination of a banking-friendly president and a more cautious leadership under Mr. Cryan will help the bank chart a new path.

When an investment bank trips up in spectacular fashion, human misfortune is often a consequence. That could mean a cashiered chief executive seeing his career and reputation ruined. Or a rogue trader who loses billions of dollars and ends up in prison.

© 2017 The New York Times News Service