James Wilson analyzes the case of Munich-based HRE, which he says reveals much about the behaviour of banks during the credit boom.
Excerpt: No sooner had Georg Funke clinched the biggest deal of his banking career than he was sent a letter that should have ended any jubilation.
Its author, a well-known figure in German banking, had cast a careful eye over both Hypo Real Estate, the property lender where Mr Funke was chief executive, and Depfa, an Irish provider of public sector loans, which HRE was buying for 5.7bn ($7.8bn, £5.4bn). As the first shadows lengthened over the world financial system in mid-2007, the writer of the letter had doubts about the wisdom of the deal.
"I was really surprised. I told Funke: 'Congratulations--I knew Depfa was looking for a buyer but I didn't think it would be you. . . good luck with the integration'," the writer says, recalling his sarcastic tone. "I wondered later whether it was a bit harsh."