The woeful state of Germany's financial system reflects not only Germany's economic malaise - "The Economist" called it "sick man" of Europe - but its failed attempt to imitate and emulate inimitable financial centers of London and New-York. It is a rebuke to misguided belief that capitalistic models - and institutions - can be transplanted in their entirety across cultural barriers. It is incontrovertible proof that history - and core competencies it spawns - still matter.

When German insurers and banks, for instance, branched into faddish businesses - such as Internet and mobile telephony - they did so in vacuum. Germany has few venture capitalists and American-style entrepreneurs. This misguided strategy resulted in a frightening erosion of strength and capital base of intrepid investors.

In a sense, Germany - and definitely its eastern Lander - is a country in transition. Risk-aversion is giving way to risk-seeking in forms of investments in equities and derivatives and venture capital. Family ownership is gradually supplanted by stock exchange listings, imported management, and mergers, acquisitions, and takeovers - both friendly and hostile. The social contracts regarding employment, pensions, role of trade unions, balance between human and pecuniary capital, and carving up of monopoly market niches - are being re-written.

Global integration means that, as sovereignty is transferred to supranational entities, cozy relationship between banks and German government on all levels is over. Last October, Hans Eichel, German finance minister, announced OECD-inspired anti-money laundering measures that are likely to compromise bank secrecy and client anonymity and, thus, hurt German - sometimes murky - banking business. Erstwhile rampant government intervention is now mitigated or outright prohibited by European Union.

Thus, German Laender are forced, by European Commission, to partly abolish, three years hence, their guarantees to Landesbanken (regional development banks) and Sparkassen (thrifts). German diversification to Austria and central and east Europe will provide only temporary respite. As EU enlarges and digests, at very least, Czech Republic, Hungary, and Poland in 2004-5 - German franchises there will come under uncompromising remit of Commission once more.

In general, Germans fared worse than Austrians in their extraterritorial banking ventures. Less cosmopolitan, with less exposure to parts of former Habsburg Empire, and struggling with a stagnant domestic economy - German banks found it difficult to turn central European banks around as successfully as likes of Austrian Erste Bank did. They did make inroads into niche structured financing markets in north Europe and USA - but these seem to be random excursions rather a studied shift of business emphasis.

On bright side, Moody's - though it maintains a negative outlook on German banking - noted, in November 2001, banks' "intrinsic financial strength and diversified operating base". Tax reform and hesitant introduction of private pensions are also cause for restrained optimism.

Pursuant to purchase of Drsedner Bank by Allianz, Moody's welcome emergence of bancassurance and Allfinanz models - financial services one stop shops. German banks are also positioned to reap benefits of their considerable investments in e-commerce, technology, and restructuring of their branch networks.

The Depression on 1929-1936 may have started with meltdown of capital markets, especially that of Wall Street - but it was exacerbated by collapse of concatenated international banking system. The world today is even more integrated. The collapse of one or more major German banks can result in dire consequences and not only in euro zone. The IMF says as much in its "World Economic Outlook" published on September 25.

The Germans deny this prognosis - and diagnosis - vehemently. Bundesbank President Ernst Welteke - a board member of European Central Bank - spent better part of last week implausibly denying any crisis in German banking. These are mere "structural problems in weak phase", he told a press conference. Nothing consolidation can't solve.

It is this consistent refusal to confront reality that is most worrisome. In short to medium term, German banks are likely to outlive storm. In process, they will lose their iron grip on domestic market as customer loyalty dissipates and foreign competition increases. If they do not confront their plight with honesty and open-mindedness, they may well be reduced to glorified back-office extensions of global giants.

Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, PopMatters, and eBookWeb , a United Press International (UPI) Senior Business Correspondent, and the editor of mental health and Central East Europe categories in The Open Directory Bellaonline, and Suite101 .

Visit Sam's Web site at http://samvak.tripod.com

Some of rackets are plain outlandish. In "wash-wash" confidence trick people have been known to pay up to $200,000 for a special solution to remove stains from millions in defaced dollar notes. Others "bought" heavily "discounted" crude oil stored in "secret" locations - or real estate in rezoned locales. "Clearing houses" or "venture capital organizations" claiming to act on behalf of Central Bank of Nigeria launder proceeds of scams.

In another twist, charities, academic institutions, nonprofit organizations, and religious groups are asked to pay inheritances tax on a "donation". Some "dignitaries" and their relatives may seek to flee country and ask victims to advance bribe money in return for a generous cut of wealth they have stashed abroad.

"Bankers" may find inactive accounts with millions of dollars - often in lottery winnings - waiting to be transferred to a safe off-shore haven. Bogus jobs with inflated wages are another ostensible way to defraud state-owned companies - as is sale of target's used vehicle to them for an extravagant price. There seems to be no end to criminal ingenuity.

Lately, correspondence purports to be coming from - often white - disinterested professional third parties. Accountants, lawyers, directors, trustees, security personnel, or bankers pretend to be acting as fiduciaries for real dignitary in need of help. Less gullible victims are subjected to plain old extortion with verbal intimidation and stalking.

The more heightened public awareness grows with over-exposure and tighter net of international cooperation against scam, wilder stories it spawns. Letters have surfaced recently signed by dying refugees, survivors of September 11 attacks, and serendipitous US commandos on mission in Afghanistan.

Governments throughout world have geared up to protect their businessmen. The US Department of Commerce, for instance, publishes "World Traders data Report", compiled by US embassy in Nigeria. It "provides following types of information: types of organizations, year established, principal owners, size, product line, and financial and trade references".

Unilateral US activity, inefficacious collaboration with Nigerian government some of whose officials are rumored to be in on deals, multilateral efforts in framework of OECD and Interpol, education and information campaigns - nothing seems to be working.

The treatment of 419 fraudsters in Nigeria is so lenient that, according to "Nigeria Tribune", United States threatened country with sanctions if it does not considerably improve its record on financial crime by November 2002. Both US Treasury's Financial Crime Enforcement Network (FINCEN) and OECD's Financial Action Task Force (FATF) had characterized country as "one of worst perpetrators of financial crimes in world". The Nigerian central bank promises to get to grips with this debilitating problem.

Nigerian themselves - though often victims of scams - take phenomenon in stride. The Nigerian "Daily Champion", proffered this insightful apologia on behalf of ruthless and merciless 419 gangs. It is worth quoting at length:

"To eradicate 419 scourge, leaders at all levels should work assiduously to create employment opportunities and people perception of leaders as role models. The country's very high unemployment figure has made nonsense of so-called democracy dividends. Great majority of Nigerian youthful school leaver's including University graduates, are without visible means of livelihood... The fact remains that most of these teeming youths cannot just watch our so-called leaders siphon their God-given wealthy. So, they resorted to alternative fraudulent means of livelihood called 419, at least to be seen as have arrived... Some of these 419ers are in National Assembly and State Houses of Assembly while some surround President and governors across country."

Some swindlers seek to glorify their criminal activities with a political and historical context. The Web site of "419 Coalition" contains letters casting scam as a form of forced reparation for slavery, akin to compensation paid by Germany to survivors of holocaust. The confidence tricksters boast of defrauding "white civilization" and unmasking falsity of its claims for superiority. But a few delusional individuals aside, this is nothing but a smokescreen.

Greed outweighs fear and avarice enmeshes people in clearly criminal enterprises. The "victims" of advance fee scams are rarely incognizant of their alleged role. They knowingly and intentionally collude with self-professed criminals to fleece governments and institutions. This is one of rare crimes where prey and perpetrator may well deserve each other.

Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, PopMatters, and eBookWeb , a United Press International (UPI) Senior Business Correspondent, and the editor of mental health and Central East Europe categories in The Open Directory Bellaonline, and Suite101 .

Visit Sam's Web site at http://samvak.tripod.com