Greece, Greece, and more Greece…

GLOBAL GLASS ONION

by rjs

The Great Goldman Sachs Fire Sale of 2008 – While one could argue that, metaphorically anyway, both Dimon and Blankfein made it to the World Series in 2009 — with Blankfein, whose firm earned $13.4 billion last year, being the M.V.P. — President Obama went one step further in trying to publicly support Wall Street by saying he knew both men to be “savvy businessmen,” and that “I, like most of the American people, don’t begrudge people success or wealth.” If everything was really under control after Lehman collapsed, why were executives dumping their stock by the bushelfull? The whole story is contained in little-noticed public records filed with the Securities and Exchange commission — see here and here — which make enjoyable reading after spending the last year listening to the gang at Goldman and other firms whine about the terms of the Tarp program and repeatedly insist that they weren’t really in all that much trouble. Because if these savvy Goldman guys were freaking out and selling large chunks of stock in the dark days of 2008, that makes it a safe bet things were plenty bad and getting worse.

Wall St. Helped to Mask Debt Fueling Europe’s Crisis – Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.  As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.

Goldman Goes Rogue – Special European Audit to Follow – By Simon Johnson – September 21, 2008, Goldman Sachs was saved from imminent collapse by the announcement that the Federal Reserve would allow it to become a bank holding company – implying unfettered access to borrowing from the Fed and other forms of implicit government support, all of which subsequently proved most beneficial.  Officials allowed Goldman to make such an unprecedented conversion in the name of global financial stability.  (The blow-by-blow account is in Andrew Ross Sorkin’s Too Big To Fail; this is confirmed in all substantial detail by Hank Paulson’s memoir.)We now learn – from Der Spiegel last week and today’s NYT – that Goldman Sachs has not only helped or encouraged some European governments to hide a large part of their debts, but it also endeavored to do so for Greece as recently as last November.  These actions are fundamentally destabilizing to the global financial system, as they undermine: the eurozone area; all attempts to bring greater transparency to government accounting; and the most basic principles that underlie well-functioning markets.  When the data are all lies, the outcomes are all bad – see the subprime mortgage crisis for further detail.A single rogue trader can bring down a bank – remember the case of Barings.  But a single rogue bank can bring down the world’s financial system.

Open Source Inquiry Opportunity: Some of Goldman’s Greece Swaps Made Public – Yves Smith – In a New York Times op-ed late last year, Bill Black, Frank Partnoy, and Eliot Spitzer called for an open source investigation: we know where the answers are. They are in the trove of e-mail messages still backed up on A.I.G. servers, as well as in the key internal accounting documents and financial models generated by A.I.G. during the past decade. Now it is worth noting that the emphasis in the Black/Partnoy/Spitzer argument was to get a lot of eyeballs on a large stash of source material that is presumably pretty accessible to the public, namely, e-mails. But there is a second line of potential open-source inquiry that would be at least as valuable: getting people who have expertise in certain types of documentation to look probe transaction documentation for deals that were deceptive…Reader Nick has provided a link to one of the now-infamous Goldman-Greek government swaps, which served to camouflage the magnitude of its fiscal deficits from the EU. His comments:

Goldman Sachs contre, tout contre, la Grèce (translation by bing)  I can therefore confirm that, according to concurrent sources, Goldman Sachs and speculative Fund managed by John Paulson would be the two main actors attacks against Greece and the euro. I’ve already detailed you in my post from February 6 speculation mechanism and I will therefore see are not. More shocking, in this case, is without doubt the role played by Goldman Sachs, at a time, advises the Greek Government, and supports secrecy, positions against Greece and the euro. This disorder role is illustrated by the recent case recalled by February 8 Spiegel and the New York Times February 14 (1): in 2002, the Bank of American case helped Greece, against remuneration of 300 million dollars in “creative accounting” operation designed to cover up some of its debt (I will come back in a future column). It is not neutral that at that time Vice President Europe’s Goldman was other than Mario Draghi, become since Governor of the Central Bank of Italy, and just see the position of Vice-President of the European Central Bank him pass under the nose. This special role of Goldman Sachs is illustrated by the fact that the Bank has always been member of syndications in Greece (just as in Portugal): it is a consortium of banks loaded by a Government to put its debt of investor when it is not sure you can directly put on the market by public tender.