Tuesday, February 16, 2010

Goldman Sachs on the hot seat in Europe...

...or, another good reason to pull your money from big banks and "too big to fail" investment firms.

Seems GS has been cooking the books for Greece at least as recently as November, and probably all through their previous EU application process, not to mention every year since - and has been doing the same for other countries. Imagine that - Goldman Sachs cooking the books.

The Baseline Scenario
Goldman Goes Rogue – Special European Audit To Follow
Written by Simon Johnson
February 14, 2010 at 9:22 pm

...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...

...This audit should focus on ten sets of questions.

1. Which eurozone governments have worked with Goldman, and on what basis, over the past decade? All actions prior to and after the introduction of the euro need to be thoroughly reexamined.

2. What transactions has Goldman facilitated and how has that affected the reporting of European government debt? (Under the Maastricht Treaty, eurozone government debt is not supposed to exceed 60 percent of GDP.)

3. In the case of Greece, the accusation is that Goldman deliberately and in a premeditated manner conspired to hide the true degree of government debt. Is this true, and to what extent has Goldman helped other countries engage in similar transactions, e.g., countries now seeking entry to the eurozone?

4. What is the full extent of Greek and other government liabilities, if these are accounted for properly? Without this reckoning, it is impossible to design a proper level of European Union (or any other) support for weaker eurozone countries.

5. Are there non-eurozone countries that have also been aided and abetted by Goldman in this fashion? For example, are the UK and Switzerland implicated – and thus endangered?

6. Has Goldman extolled the virtues of government debt in Greece, or other countries, while at the same time helping to deceive investors on the true risks inherent in those debts? What were Goldman’s own holdings of these securities?

7. Is there evidence that Goldman has structured similar transactions for the private sector – enabling companies to conceal the level of their true indebtedness? Have securities issued by such firms also been endorsed by Goldman to the buying public?

8. Were Goldman’s US-based supervisors aware of Goldman’s activities in Greece and other eurozone countries? Did they condone activities that undermine the integrity of the European Union?

9. Where was the European Central Bank while all of this was happening? Has the ECB become dangerously enraptured with the new Wall Street and its “techniques”?

10. Did any responsible official really think that what Goldman was constructing was really some sort of productivity-enhancing financial innovation – as opposed to a sophisticated form of scam?

The answer to the last question is most certainly "no." The government and regulatory officials of Europe looked the other way, exactly the way that American officials did, because GS either bribed them to do so in some way or gave them assurances that they had everything under control and nothing bad would happen, or both.

And, since nobody wanted to rock the boat, the BS was quietly accepted, all parties knowing full well that it was BS from GS. Let's be clear on that, class. There are no innocent victims here.

But it will be good to see Europe ban GS from Eurozone business. Such calls are already being made, and unlike here in the US, the European Union is not adverse to some serious blame-shifting to the fat cat ceo's of transnational corporations.

What we should ask ourselves is how many other large banks and investment firms are cooking their own books and those of their well-heeled clients. The answer, most likely, is all of them.

See also:

UK Daily Mail online
Goldman Sachs in new storm over secret deal to mask Greek debts
By Sam Fleming
Last updated at 9:52 AM on 16th February 2010

...Goldman Sachs declined to comment last night.

The bank has come under steady fire over its role in the sub-prime crisis and the vast bonuses being doled out to employees. Last month it set aside £10billion for its staff's performance in 2009...

PS - oh yes, I forgot: Goldman Sachs provides more fodder for anti-semitism. Just what we need.

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