Compensation claim

The disgruntled shareholders claim that the German lender withheld information on investment risks. They are seeking more than 320 million euros ($461 million) in compensation.

The case could be supported by thousands of investors, and legal experts believe that the revelations of suppressed data could lead to an increase in compensation in the region of "several hundred million euros."

Since HRE was put under state control in a 100-billion-euro bail-out last year, the federal government would be liable to pay any compensation.

The German government announced a bailout of HRE on Sept. 29, 2008, two weeks after Lehman Brothers of New York filed for bankruptcy.

The compensation claim puts further pressure on the German government and Chancellor Angela Merkel in particular, who has been accused of waiting too long to intervene.

A German parliamentary committee investigating HRE's state rescue has heard from various ministers and financial officials that the government's actions were needed to avoid a total meltdown in the financial sector.

Investigation won't hear Merkel testimony

While Finance Minister Peer Steinbrueck is expected to appear before the investigative committee, calls from the opposition Green party for Chancellor Angela Merkel to give evidence have been rejected.

A joint opposition request to televise Steinbrueck's appearance before the committee was also rejected.

The Greens accused the government coalition last week of wanting to protect Merkel from critical questions, despite the fact that the chancellor's negotiations with Deutsche Bank chief Josef Ackermann had played a key role in the HRE rescue deal.

"Merkel negotiated the conditions for the rescue of HRE in a decisive telephone call with Deutsche Bank chief Josef Ackermann," said Green Party parliamentary leader Juergen Trittin in his call for Merkel to testify.

"The grand coalition is avoiding the public," Green Party representative Gerhard Schick added.

Ackermann confirmed before the parliamentary committee earlier this week that he had received a last-minute telephone call from Merkel saying the state would rescue the stricken bank.

The opposition has accused the government of acting too slowly in its rescue of HRE, thereby raising the amount which taxpayers had to spend in the bailout. HRE eventually got some 100 billion euros of state aid.

The bank, which has now been nationalized, had become massively exposed through its Irish subsidiary to the global credit crunch of 2008.

Financial chiefs claim HRE bail-out saved system

Former HRE chief executive Wolfgang Sprissler said last week that "absolute chaos would have broken out on world financial markets" if the bank had been allowed to fail.

Jochen Sanio, the president of German banking regulator BaFin, said that BaFin was unable to prevent HRE's collapse and that the state had to buy the bank to avoid "an end of the world financial system."

German central bank governor Axel Weber added that an HRE insolvency would have had "incalculable risks" and the term "meltdown would have been quite appropriate."

"There was really a feeling of doom," said Weber, who is also an influential member of the European Central Bank's governing council.

nda/dpa/AFP
Editor: Nancy Isenson