US mortgage turmoil hit investor confidence on the other side of the Atlantic on Wednesday as details emerged of a German government rescue of a domestic lender that suffered heavy losses on subprime investments. The further government intervention suggested that the problems at IKB were much worse than thought. Mr Peer Steinbrück, German finance minister, phoned several banking executives including Josef Ackermann, chief executive of Deutsche Bank on Sunday to bring them on board.
The rescue of IKB, a specialist lender based in Düsseldorf, began on Sunday when Steinbrück called top banking executives to discuss a bail-out. According to people who took part in the conference call, Jochen Sanio, head of Germany’s financial regulator, is said to have warned of the worst banking crisis since 1931.