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ADAM DAVIDSON: I'm Adam Davidson and I'll pick up here with the story of that Irish bank that has, to put it mildly, its own problems. If those school boards in Wisconsin got in trouble by acting more like a bank or a hedge fund, Depfa made a troubling transformation of its own from being a small bank making local loans to a major global enterprise, intertwined with the finances of cities and states from Detroit to Dubai. Like David said, Depfa's headquarters are indeed in Dublin, Ireland but if you decided for some reason to fly there to visit the bank, you wouldn't have much sense that you're in that ancient city. Colm McCarthy teaches finance at University College Dublin.

Mr. COLM MCCARTHY (Professor, University College Dublin): It's all new. There was nothing down in that area of the city except old cattle yards where they used to export live cattle to Liverpool and stuff like that.

DAVIDSON: Oh, really?

Mr. MCCARTHY: Abandoned for 20 years. So virtually all the buildings down there are new.

DAVIDSON: And sort of steel and glass financial center kind of.

Mr. MCCARTHY: Yes, sure.

DAVIDSON: Those glass and steel towers were built when Ireland decided, sort of all of a sudden to become a global banking center. This was back in the 1980s. That meant convincing banks in other places to move to Ireland. So, they offered really low corporate tax and lighter regulation and it worked. For the first time in centuries, people and businesses were moving to Ireland, not away from Ireland.

Mr. MCCARTHY: A big inflow of people from Central and Eastern Europe and from many other parts of the world. You know, the economy was booming and there were jobs for everybody.

DAVIDSON: Depfa was one of those immigrants. It's only been Irish for six years. Before that, Depfa was a German bank - a really, really German bank. It was owned by the German government. Its core business was German government bonds. You really can't get less global than that. And then, in the early 1990s, along came a guy named Gerhard Bruckermann, the bank's new CEO. One country wasn't big enough for him. He wanted the world. So, he moved the headquarters to Dublin, opened offices in Turkey, India, Brazil, all over Europe and Asia. And everywhere he went, huge success. And then, he made the move that brought Depfa in contact with the school boards in Wisconsin. He opened in New York with a ridiculously audacious goal - to dominate American municipal finance. Herb Jacobs ran the US operation.

Mr. HERB JACOBS (Depfa Managing Director): We went from not being a player to being one of the top five.

DAVIDSON: I can see the pride in your face.

Mr. JACOBS: It's true. This was a wonderful moment.

DAVIDSON: As recently as February of this year when Jacobs retired, Depfa was doing amazingly well.

Mr. JACOBS: I don't think any of us envisioned that this would become a wholesale slaughter that it eventually did become.

DAVIDSON: Depfa's wholesale slaughter was a lot like other wholesale slaughters we've been hearing about lately, like Bear Stearns or AIG. Because of all the chaos in the financial markets, Depfa suddenly couldn't borrow money fast enough to pay its debts. And its debts kept getting bigger. By September of this year, it was about to collapse - right when the government of Ireland promised to bailout any troubled Irish banks. But Depfa learned that even if you're a bank you can get harsh treatment as an immigrant. The government told them, they're too big to save. Colm McCarthy.

Mr. MCCARTHY: They may have had a balance sheet bigger than the rest of the Irish banks put together, and the Irish taxpayers couldn't realistically be asked to guarantee the balance sheets of, you know, great big international banks that happened to be located here.

DAVIDSON: In the end, Depfa was saved, sort of, in a bailout by the German government. But it's very different and much weaker bank that it was before. And the whole saga has had unintended consequences on cities and town all across America.

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