When Greece Met Goldman

老顽童

鼓吹阴谋论的同学又有证据了，看看狗剩是如何设计希腊从而捞钱的。

By Thomas G. Donlan

If you lie down with dogs, you'll get up with fleas. Goldman Sachs and the Greek government lay down together, and now the European Union suffers from a plague of fleas.

In 2001, Greece wanted to dress up its finances to qualify for admission to the European Union and to trade in its tarnished drachmas for shiny new euros. Politicians and bureaucrats could see the advantages of borrowing in a currency made strong by the strength of the big German and French economies. The EU also makes generous subsidies to uncompetitive industries in its member countries -- especially the poor countries, and especially in agriculture.

Greece was spending enthusiastically and taxing ineffectually. It could not qualify to become a member of the euro zone because its deficits were too high.

Enter Goldman Sachs, a firm that lives to help its customers do what they want, even if it isn't in the clients' best interests. Some clever young bankers in Goldman's London office turned Greek dross into something more attractive -- not gold exactly, more like gilded dross. Their deal converted inconvenient billions of dollars of Greek debt into currency hedges that weren't reported as national liabilities.

All sides ignored the fact that the currency hedges were structured to lose money for Greece in proportion to the debt being hidden, plus something left over for Goldman -- like about $300 million.

This would be nothing more than a bad joke on gullible Europeans, if fiscal deceit hadn't become a habit in Greece lasting to this day, and if the flea-bitten financial practices had not spread to other countries.

Now traders and journalists are comparing Greece to Lehman Brothers, or maybe AIG, depending on whether they believe Greece will default or be bailed out by the stronger members of the EU.

Greece has 53 billion euros of debt to roll over this year -- unless it is still lying and the number is bigger. Pension funds and other international investment sheep who bought 8 billion euros (US$10.9 billion) of Greek debt in January probably aren't dumb enough to buy again. Even the rating agencies are warning about downgrades.

The new Greek government would like the world to believe it will cut civil servants' jobs and salaries, raise tax rates and collect taxes owing -- and generally make itself creditworthy. To this, millions of Greeks have gone into the streets and said something rude.

In Europe now, as on Wall Street in the summer of 2008, everybody knows there are problems. Nobody knows how big they are, or how many countries -- and banks -- share them. And, as in the summer of 2008, Goldman Sachs has nimbly used its knowledge to place new bets. Last week it was reported that Goldman had turned on its former Greek clients, buying up big interests in credit-default swaps that would pay the firm if the Greeks can't pay their debts.

Although stage-managed in London, it's a perfect Wall Street play: First Goldman helped create a problem, then it stands to profit from it. But the lesson goes beyond Goldman Sachs.

After decades of developing ever-more efficient ways of front-running their customers, Wall Street casino sharks have ceased to care about their clients. The sharks have no concept of fiduciary duty, unless there is a controlling legal principle and cops to enforce it.

The next important question is, Who is feeding the sharks? A trader can still buy insurance on $10 million of Greek debt for $400,000. What idiot makes that trade with Goldman or anyone else? If it turns out to be AIG, we won't be shocked.

In Europe as in the U.S., some people blame the existence of credit-default swaps for the Greek problems, which is like blaming the dog for having fleas. The solution is flea powder -- ethical practice and fiscal prudence -- all around.