Goldman belittles Greece’s billions

By Felix Salmon
February 22, 2010
€2.367 billion as being "a rather small" amount of money is not going to help.

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Memo to Lucas van Praag and the rest of the Goldman Sachs communications machine: you are broadly considered to be out of touch, living large on Planet Billions while the rest of us struggle in one of the harshest economic environments of the post-war era. You might want do something about that. Characterizing €2.367 billion as being “a rather small” amount of money is not going to help.

The fact is that €2.367 billion is a rather large amount of money — both in absolute terms and in terms of a percentage of GDP. Your adjectives just make you look out-of-touch, both in your official press release, where you describe the sum as “just 1.6%” of Greece’s GDP, and in your statement to the UK parliament that it was “a rather small but nevertheless not insignificant reduction” in official debt figures.

Translating into American, remember, 1.6% of GDP is about $227 billion — more than the cost of bailing out AIG, Bear Stearns, GM, and Chrysler combined. And depending on how you account for them, you might even be able to throw Fannie and Freddie in there as well. There’s no such thing as “just” 1.6% of GDP — especially when you’re magically making those billions disappear through clever manipulation of currency swaps.

Speaking as someone who came to your defense in this case, today’s statements make me feel much less inclined to push that case any further: they look as though you’re trying, unsubtly, to downplay the severity of what Greece did here. That’s not a good idea, not in an era when full transparency is the greatest possible good. If this is how you’re attempting to “re-burnish the image of Goldman“, you might want to start questioning the advice you’re getting.


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great point on the meaningfulness of “1.6%”

Posted by KidDynamite | Report as abusive

They didn’t say “just 1.6%” of Greece’s GDP, Felix. They said 1.6% of Greece’s debt as a percentage of GDP.” There’s a pretty big difference. Posts like this are part of the reason Goldman finds dealing with the press so exasperating.

Posted by jhedges | Report as abusive

jhedges – please elaborate…

quote from the press release:

“These transactions reduced Greece’s foreign denominated debt in Euro terms by €2.367bn and, in turn, decreased Greece’s debt as a percentage of GDP by just 1.6%, from 105.3% to 103.7%.”

Felix’s point is valid. no? if we reduced the US’s debt as a percentage of GDP by 1.6%, it would be roughly $227B.

Posted by KidDynamite | Report as abusive

Journalist misreads something. Investment Bank perpetrates one of the largest bits of grift in recorded history. And your concern lies with the the former? You sir, win the kewpie doll.

Posted by Uncle_Billy | Report as abusive


Earth to Goldman, Sachs. Earth to Goldman, Sachs.

Come in, Goldman, Sachs …

Posted by deLafayette | Report as abusive

Why is it now just about every shady international financial deal that comes to light these days has Goldman’s name on it? When is everyone out the going to get tired of backstopping these clowns? I for one am ready for them to take their ill gotten gains out of the US and base their criminal operation in some offshore hideout. We can’t afford having operators like this in our country. I’m sure there are a lot of countries out there who would welcome them with open arms. Like UAE or someplace like that. Just please take your money and leave, Goldman, you’ve done enough damage here in the States. Just leave.

Posted by Woltmann | Report as abusive

Thus spake the Mouth of Sauron
And Middle Earth’s grass withered
That was touched by its breath.

Posted by EmilianoZ | Report as abusive

{Wolt: We can’t afford having operators like this in our country.}

Some other Investment Bank will simply take over their accounts, just like the GS crows picked over the roadkill remains of Lehman Bros. And made a healthy profit doing so.

Everyone is talking “regulatory effort” to reign in these clowns. The problem with such regulation is that these Finance Engineer geniuses simply will concoct some other scam, which is entirely legal.

I suggest that opt for a far more effective formula. We rectify the wrong that Reckless Ronnie did by raising marginal income taxes back to the levels of 60/70/80% above some threshold amount (say $10M/$20M/$30M).

Meaning, tax the piss outta them.

Of course, that smacks of the devil in the form of Socialism! We can’t have that in our God Fearing (but Plutocrat) country. So the Troglodyte Senate Republicans will stonewall this unto their last filibuster breath.

You want Real Change? Be sure to militate for it during the upcoming Mid-Terms. Lesson learned so far: One PotUS election is not nearly enough to change the works in LaLaLand on the Potomac.

Posted by deLafayette | Report as abusive

jhedges- there is no difference at all. Thanks for playing, please try again.

Posted by johnhhaskell | Report as abusive

there are so many negative news about Goldman, why don’t we force our government to close this firm instead of hiring those clowns from Goldman to screw up our country. CEO of Goldman publicly made statement they are doing “God’s work.” His powerful wife demanded special separate entrance to charity gathering in Long Island because her husband is doing “god’s work”. If we create enough public outrage, maybe we can keep all clients away from Goldman to make it poor house.

Posted by ihk888 | Report as abusive

since you did quote “a rather small”: he did go on to say “nevertheless not insignificant reduction” hmm maybe he should have that before saying small.

plus it’s about context. 1.6% of the planets and stars in the universe is going to be a hugeeee number. Damn GS! for saying that is “a rather small” number. what universe do they live in.

Posted by savo | Report as abusive

I’m with savo. 1.6% is a small percentage, no matter what you’re talking about.

Posted by drewbie | Report as abusive

It’s only money. I’m sure if we stopped using it altogether we could get rid of small problems like Goldman Sachs in no time.

Posted by HBC | Report as abusive

Good post!

The issue is not simply the scale of transaction (although few people on Earth will ever see a sum as vast as a billion dollars); the point is that those derivative transactions were dishonest. Specifically they used falsified currency exchange rates to hide the fact that the transactions were loans. They use the purposefully misleading term ‘historical exchange rates’ to gloss over the fact that the exchange rates used in the contract were simply false.

Mr. van Praag continues to mislead, always referring to the contracts as currency swaps, instead of loans. Real currency swaps would have used real exchange rates, not false ones.

Posted by DanHess | Report as abusive

It’s only money and there’ll always be apologists defending Goldman’s right to do whatever necessary to earn more of it no matter the cost. The financial beast will consume us all soon enough. 010/02/whos-afraid-of-big-bad-wolf.html

Posted by nahummer | Report as abusive