Shares of Deutsche Bank have been getting slammed lately as questions about the banks liquidity continue to plague investors. A lot of beginners may not quite understand what the big deal is, so here is a brief breakdown.

During the financial crisis in 2008 nearly every bank in the U.S., and virtually the world, was on the verge of collapse. The banks held a lot of assets in subprime mortgages that were foreclosing, and when the banks tried to sell these subprime mortgages they were virtually worthless because no one knew if they could be paid back.

Banks struggled to raise capital and had very little cash to perform their business. I’m going to put in plug for those that may be struggling in a similar situation now.

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Nevertheless, mortgages with reverse payments can be quite useful because the payments will be made to you, rather than by you. That will help you to gain financial freedom and flexibility you might not otherwise have.

Anyway, back to Deutsche Bank!

Many are claiming Deutsche Bank is in a similar situation today, and that the bank will eventually collapse. This is highly unlikely due to a number of important facts.

It all started earlier this year when Deutsche posted its first full-year loss since the 2008 financial crisis. There were a number of things on their financial statements including fines and lawsuits. Shares took a pretty hard hit after the announcement, but were slowly beginning to recover.

Then the U.S. government announced that they would be prosecuting Deutsche Bank for the amount of nearly $14 billion dollars. This sent shares tumbling all over again, finally starting to recover at a 30-year low. Finally, rumors are out that there will be a 20% decrease in Deutsche Bank’s workforce in the coming year, a sure sign that a company is struggling.

At this point many investors are rightly worried that Deutsche may not be able to survive. Many of these investors were alive and kicking when Lehman Brothers went under and likely lost a lot of money in the process.

But Deutsche Bank is not Lehman Brothers and today is not 2008. While banks are still struggling universally and Deutsche is definitely not in a great place financially, bankruptcy is still not in the cards. This is true for a couple of reasons.

The biggest one is assets. The reason banks were hit so hard in 2008 is that their assets and collateral basically became worthless overnight. They were unable to sell of their books to stay afloat because no one wanted them. Deutsche bank does not have that problem today. In fact, the CEO of Chase bank recently came out and said Deutsche bank has a strong book and should be fine.

They also have a lot more wiggle room. They should be able to sell some of their book, merge with stronger banks, cut bonuses, cut dividends, and take other measures that make sense during tough times.

In fact, the market gave a thumbs up to Deutsche Bank just this week when word came out that they could cut a deal with the U.S. and pay up to 65% less in fines.

When the share price responded positively to this it showed that investors are more worried about current cash levels. They are scared that the bank will need to dilute shares or issue additional debt to pay off fines and fees. While this wouldn’t be great for shareholders, neither would it be the end of the world.

Simply put, Deutsche Bank has a high probability of surviving this negative time and coming out perhaps even a little stronger and fiscally responsible. It may be a good investment at some of these all-time lows. Do your own homework and decide.

What do you think?

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