Comments on: The Greek derivatives aren’t Goldman’s fault

By: M.G.inProgress

M.G.inProgress — Wed, 24 Feb 2010 08:47:50 +0000

I agree with you and contend that:
The Greek government requested explicitly this kind of deal to meet the criteria to get into the Euro;
The European Commission (its officials and desk officers) which is in charge to monitor member states’ economies knew about it;
Eurostat (its officials and missions team members) which provides data to “certify” the national accounts knew about the deal and did not construed it as a problem of regularity and legality.

Alternatively we have to think that officials in the EU institutions are incompetent (some really are about swap deals at least) and they did not see this coming. However bearing in mind the size of the operation and the numbers the deal cannot go unnoticed (particularly for Bank of Greece and balance of payments accounts).

Moreover some officials dealing with this in the European Commission and Eurostat are and were Greek.

Under the above circumstances one would conclude that Goldman Sachs provided the requested services and of course made money with it.

By: DanHess

DanHess — Mon, 22 Feb 2010 19:14:44 +0000

At the center of these derivatives were currency swaps that used false and dishonest numbers for exchange rates. Goldman’s term ‘historical exchange rates’ is hilarious. My ‘historical weight’ is a svelte 145 lbs, but if I go around telling people that I will recieve laughter.

By: DanHess

DanHess — Thu, 18 Feb 2010 20:10:23 +0000

Why are we so mad at Goldman as compared with the others? Aren’t all of these banks engaged in the same questionable things?

Goldman is supposed to be America’s best. They are a role model that all of Wall Street aims (for better and usually for worse) to emulate. If Goldman Sachs does something, it is fair game for everybody.

We expect Goldman Sachs to be one of America’s crown jewels. That is why Goldman’s poor ethics bothers us so much (even beyond the economic harm, which is great). If it was some second rate investment house that was doing these ethically abhorent things, we would be much less troubled.

By: micromeme

micromeme — Wed, 17 Feb 2010 21:50:10 +0000

following up on the earlier comment –
(see bloomberg http://www.bloomberg.com/apps/news?pid=2 0601087&sid=asBNXSLtlN9E )

“Goldman Sachs Group Inc. managed $15 billion of bond sales for Greece after arranging a currency swap that allowed the government to hide the extent of its deficit.

No mention was made of the swap in sales documents for the securities in at least six of the 10 sales the bank arranged for Greece since the transaction, according to a review of the prospectuses by Bloomberg. The New York-based firm helped Greece raise $1 billion of off-balance-sheet funding in 2002 through the swap, which European Union regulators said they knew nothing about until recent days.”

Hat tip John Cole (ie http://www.balloon-juice.com/2010/02/17/ the-masters-of-the-universe-strike-again / )

By: rootless_e

rootless_e — Wed, 17 Feb 2010 20:32:26 +0000

DanHess : Absolutely not. The loan was structured to use a method for pretending loans away that was specifically authorized by the same EU regulators who are now pretending to be shocked. Certainly the German government, after dumping 35BEuros into Hypobank is not a stranger to the subject of financial chicanery on this scale.

By: rootless_e

rootless_e — Wed, 17 Feb 2010 20:22:09 +0000

I wonder if the poor taxpayers of Greece understand that the German government is attempting to avoid liability on the CDS that Depfa sold to GS.

By: DanHess

DanHess — Wed, 17 Feb 2010 18:59:13 +0000

@expost –

Either you don’t understand or are purposefully trying to confusing the issue. The problem is not that Goldman is lending. The problem is that they lent to a country in a way that was structured expressly to deceive Europe and the public. Their product was not the loan. Greece had access to the bond market. Rather they were selling financial deception. It is financial deception that was not available on the simple bond market.

As for Greece, they are definitely getting their share of scorn over this.

By: breckandy

breckandy — Wed, 17 Feb 2010 18:34:29 +0000

They are a Cabal of smart people all “doing Gods work”

Mr.Salmon probably feels it is just “doing business”

Never mind the peasant and working class gets burned.

They know we can do nothing about it.

By: yankeee

yankeee — Wed, 17 Feb 2010 16:35:52 +0000

It´s good to be Goldman Sachs!

By: yankeee

yankeee — Wed, 17 Feb 2010 16:26:52 +0000

It will indeed be interesting to see if the CFA says anything. I very much doubt it. Cheers

By: comment

comment — Wed, 17 Feb 2010 00:58:05 +0000

Just because a deal is made, doesn’t mean that it cannot be declared a fraud, and its course reversed. Think – “lemon law” in car buying. So I think it is perfectly reasonable to criticize a deal even after it is done if it becomes evident that information was purposefully consealed.

By: expost

expost — Wed, 17 Feb 2010 00:02:07 +0000

Criticizing a risk deal ex post is like calling the flip after looking. When debtors breach, the lenders were “immoral thieves”? We heard the same in US sub-prime (ca 2007). What about those who didn’t hold their end of the bargain? Why is Greece martyred for poorly managing GS’ investors’ assets?

Maybe all the Monday morning QBs can don their holy sandals and smooth revenue/expenses through time without risk capital… or with their OWN capital.

Did GS breach contract? This is GS’ problem (they lent the money), but how their fault?

If banks “don’t lend” or they lend “too much”, the same people complain. Where’s their bank?

By: Sandrew

Sandrew — Tue, 16 Feb 2010 23:38:30 +0000

Yet another case of derivatives being structured for regulatory arbitrage (not capital relief for a change, but what sounds suspiciously like the sovereign equivalent thereof). Remind me again what legitimate purpose derivatives serve; I’m quickly losing faith.

By: KirkD

KirkD — Tue, 16 Feb 2010 23:13:00 +0000

Don’t Know Who Sucks More? Felix or Goldman???

By: Bludde

Bludde — Tue, 16 Feb 2010 22:57:02 +0000

I recall July/August 1998. Some 300 of us were crowded into the Metropole in Moscow waiting to hear the word from Lipton. We had followed the Asst Tsy Secy who was dispatched by Summers to query the Russians on what happened to the $4b that was sent to their central bank just a month prior. Apparently it disappeared from the FRBNY just as soon as the Russian Central Bank was credited. Unable to meet with Dubynin et al, and only given an audience with the PM who expressed total ignorance, Lipton signalled “machst nicht” to Summers and Clinton pulled the plug. At the same time GS was busy scouring for takers of its 10b new issue of Russian bonds. The bids fell woefully short just 6.5b. GS spun around and went short. Short positioning (they said at the time)in order to offer their customers bids for the inevitable deluge of sellers… That’s Goldman.. even in Corporate bonds they oversell 15%, delaying deliveries to little people like us, whilst satisfying customers like Pimco.. then picking up in the secondary markets as the bonds fall in price, to deliver to us, often 3 weeks late..