Surprise, Surprise: Our Goldman Sachs Buddies Are Knee Deep in the Greek Debt Crisis

~~By InsightAnalytical-GRL

Well, here we go again!

Goldman Sachs had a role in creating the current debt crisis in Greece. Why am I not surprised?

From Spiegel Online International:

How Goldman Sachs Helped Greece to Mask its True Debt

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country’s already bloated deficit.

snip

Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. “Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future,” one insider recalled, adding that Mediterranean countries had snapped up such products.

Apparently Italy also hid its real debt, but with another U.S. bank which isn’t named in the article.

The article continues:

Greece’s debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.

Fictional Exchange Rates

Such transactions are part of normal government refinancing. Europe’s governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

This credit disguised as a swap didn’t show up in the Greek debt statistics. Eurostat’s reporting rules don’t comprehensively record transactions involving financial derivatives. “The Maastricht rules can be circumvented quite legally through swaps,” says a German derivatives dealer.

more

“Fictional exchange rates.”  Incredible.

But not surprising if you’ve followed the recent actions and attitude of Goldman Sachs. You know, the guys who talk about “morality in the marketplace”…

Sigh….

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This Would Be the Laugh of the Day if It Weren’t So Aggravating: Pious Rationalizations About “Morality in the Marketplace” from Our Buddies at Goldman Sachs 10/21/2009

Goldman Sachs Chairman & CEO Says Company Is Part of a “Virtuous Cycle” With a “Social Purpose” Even as It Apparently Moves Markets in “Miraculous” Ways (SEC, Where Are You?) November 8, 2009