The head of Germany’s troubled mortgage lender Hypo Real Estate resigned Tuesday, two days after the German government stepped in with a 50 billion euros ($68 billion) bailout.
Hypo Real Estate's stocks continued to drop even after the bailout
The bank named Axel Wieandt, 42, as the new head following Georg Funke's resignation Tuesday. Wieandt was formerly in charge of the investment branch at Deutsche Bank.
Georg Funke's resignation did not come as a surprise. Top political leaders from the major political parties had been calling for his head. Funke was criticized for allegedly failing to disclose the depths of the problems at Germany's fourth largest bank.
Hypo Real Estate (HRE) had recently agreed to a 35 billion euro bailout, but later said that the amount would be insufficient. Banks that had agreed to shoulder 8.5 billion of that total balked when the new problems came to light, forcing the government to step in with an emergency rescue plan that will cost 15 billion more than the original plan.
Politicians blame management
Funke was blamed for the first bailout falling through
German Finance Minister Peer Steinbrueck unleashed harsh criticism against HRE top management, calling for their resignations. He accused HRE of using lawyers to escape responsibilities even as it was seeking state aid.
German Chancellor Angela Merkel also expressed her displeasure saying that "those who managed their company in an irresponsible way will have to answer for it."
Too important to fail
HRE said its problems stemmed from a downgrading by rating agencies that allowed creditors to call up loans. Berlin decided the bank was too important to let fail because of its involvement in the pfandbrief, a form of German bond.
Munich-based HRE lends to commercial developers and municipalities to build projects such as hotels, airports and highways.