Will the EU Go After Goldmans?

C

christianhgross

I have been closely following the Greece situation, and today I read something where I think Goldman's better start getting the lawyers out.

http://www.cnbc.com/id/35404500

"EU spokesman Amadeu Altafaj Tardio says the EU executive has given Greece an end-of-February deadline to give details on how deals called currency swaps affected government accounts since 2001.

He said such swaps weren't illegal unless the Greece was not using market rates to calculate the exchange rate"

Notice how he said that the swaps were not illegal, but the fact that if wrong exchange rates were used, well that is another story.

I am almost willing to bet this is going to be used to bring Goldman's down! After all if you are selling a product to a client and you are advising them to do illegal stuff, you better start writing a big fat cheque!

Hey I got my popcorn out and am waiting to see the next step...
 
Simon Johnson ...

http://baselinescenario.com/2010/02...eed:+BaselineScenario+(The+Baseline+Scenario)

What happened to the global economy and what we can do about it
Goldman Goes Rogue – Special European Audit To Follow

At 9:30pm on Sunday, September 21, 2008, Goldman Sachs was saved from imminent collapse by the announcement that the Federal Reserve would allow it to become a bank holding company – implying unfettered access to borrowing from the Fed and other forms of implicit government support, all of which subsequently proved most beneficial. Officials allowed Goldman to make such an unprecedented conversion in the name of global financial stability. (The blow-by-blow account is in Andrew Ross Sorkin’s Too Big To Fail; this is confirmed in all substantial detail by Hank Paulson’s memoir.)

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.

A single rogue trader can bring down a bank – remember the case of Barings. But a single rogue bank can bring down the world’s financial system.

Goldman will dismiss this as “business as usual” and, to be sure, a few phone calls around Washington will help ensure that Goldman’s primary supervisor – now the Fed – looks the other way.

But the affair is now out of Ben Bernanke’s hands, and quite far from people who are easily swayed by the White House. It goes immediately to the European Commission, which has jurisdiction over eurozone budget issues. Faced with enormous pressure from those eurozone countries now on the hook for saving Greece, the Commission will surely launch a special audit of Goldman and all its European clients.

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 Federal Reserve must cooperate fully with this investigation. Ordinarily, the Fed might be tempted to sit on useful information, but they can now feel themselves in Senator Bob Corker’s crosshairs. Republican Senator Corker is willing to cooperate with Senator Dodd on financial sector reform, opening up the possibility of legislation that will pass the Senate, but he wants the Fed to lose its supervisory powers. If the Fed refuses to help – willingly and fully - the European Commission with bringing Goldman to account, that will just strengthen the hand of Senator Corker and his allies.

If the Federal Reserve were an effective supervisor, it would have the political will sufficient to determine that Goldman Sachs has not been acting in accordance with its banking license. But any meaningful action from this direction seems unlikely.

Instead, Goldman will probably be blacklisted from working with eurozone governments for the foreseeable future; as was the case with Salomon Brothers 20 years ago, Goldman may be on its way to be banned from some government securities markets altogether. If it is to be allowed back into this arena, it will have to address the inherent conflicts of interest between advising a government on how to put (deceptive levels of) lipstick on a pig and cajoling investors into buying livestock at inflated prices.

And the US government, at the highest levels, has to ask a fundamental question: For how long does it wish to be intimately associated with Goldman Sachs and this kind of destabilizing action? What is the priority here - a sustainable recovery and a viable financial system, or one particular set of investment bankers?

To preserve Goldman, on incredibly generous terms, in the name of saving the financial system was and is hard to defend – but that is where we are. To allow the current government-backed (massive) Goldman to behave recklessly and with complete disregard to the basic tenets of international financial stability is utterly indefensible.

The credibility of the Federal Reserve, already at an all-time low, has just suffered another crippling blow; the ECB is also now in the line of fire. Goldman Sachs has a lot to answer for.

By Simon Johnson
 
Quote from rcaldwell:

Once they are gone, maybe the process of healing the financial system can begin.
More...

I have been neither friend nor for of Goldman's, but with what I saw from ralph00 article, Goldman's is getting close to being toast!

And you are right, maybe now the financial system can heal...
 
Quote from rcaldwell:

Once they are gone, maybe the process of healing the financial system can begin.
More...
I agree with you, but keep in mind that an ex-Goldman is "inside" ECB: namely the boss of the Italian Central Bank, Mr.Mario Draghi.
They wont go down without fighting.
I'm afraid they will never go.
 
Quote from C6H12O6:

I agree with you, but keep in mind that an ex-Goldman is "inside" ECB: namely the boss of the Italian Central Bank, Mr.Mario Draghi.
They wont go down without fighting.
I'm afraid they will never go.
More...

You mean the I in PIIGS?

Somehow I think the Italian banker will keep quiet... Especially since Germany will have its say in all of the businesses...
 
Quote from christianhgross:

You mean the I in PIIGS?

Somehow I think the Italian banker will keep quiet... Especially since Germany will have its say in all of the businesses...
More...
I mean the member of BIS, I mean the chairman of the Financial Stability Board.
http://en.wikipedia.org/wiki/Mario_Draghi
Don't underestimate GS.
He's italian, but since I'm italian too and I know well what he and Goldman did in 1992 against Italy, I don't consider him italian any more.
I think he's not endorsed by anyone here.
I sincerely hope Axel Weber will become the next boss of ECB and Germany will have its say in kicking Goldman away.
There, I said it.
 
Goldman Sachs is the financial arm of the US government and its millitary industrial complex.

Nobody will touch them.....yet.

All the rest is just noise.
 
Quote from C6H12O6:

I mean the member of BIS, I mean the chairman of the Financial Stability Board.
http://en.wikipedia.org/wiki/Mario_Draghi
Don't underestimate GS.
He's italian, but since I'm italian too and I know well what he and Goldman did in 1992 against Italy, I don't consider him italian any more.
I think he's not endorsed by anyone here.
I sincerely hope Axel Weber will become the next boss of ECB and Germany will have its say in kicking Goldman away.
There, I said it.
More...

Ok I'll bite what did he do to Italy?
 
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