How Goldman Sacked Greece

by Greg Palast (In These Times) | Greg Palast
November 6, 2011

Here’s what we’re told:

Greece’s economy blew apart because a bunch of olive-spitting, ouzo-guzzling, lazy-ass Greeks refuse to put in a full day’s work, retire while they’re still teenagers, pocket pensions fit for a pasha; and they’ve gone on a social-services spending spree using borrowed money. Now that the bill has come due and the Greeks have to pay with higher taxes and cuts in their big fat welfare state, they run riot, screaming in the streets, busting windows and burning banks.

I don’t buy it.  I don’t buy it because of the document in my hand marked, “RESTRICTED DISTRIBUTION.”

I’ll cut to the indictment:  Greece is a crime scene.  The people are victims of a fraud, a scam, a hustle and a flim-flam.   And––cover the children’s ears when I say this––a bank named Goldman Sachs is holding the smoking gun.

In 2002, Goldman Sachs secretly bought up €2.3 billion in Greek government debt, converted it all into yen and dollars, then immediately sold it back to Greece.

Goldman took a huge loss on the trade.

Is Goldman that stupid?

Goldman is stupid—like a fox. The deal was a con, with Goldman making up a phony-baloney exchange rate for the transaction.   Why?

Goldman had cut a secret deal with the Greek government in power then.  Their game:  to conceal a massive budget deficit.  Goldman’s fake loss was the Greek government’s fake gain.

Goldman would get repayment of its “loss” from the government at loan-shark rates.

The point is, through this crazy and costly legerdemain, Greece’s right-wing free-market government was able to pretend its deficits never exceeded 3 percent of GDP.

Cool. Fraudulent but cool.

But flim-flam isn’t cheap these days: On top of murderous interest payments, Goldman charged the Greeks over a quarter billion dollars in fees.

When the new Socialist government of George Papandreou came into office, they opened up the books and Goldman’s bats flew out.  Investors’ went berserk, demanding monster interest rates to lend more money to roll over this debt.

Greece’s panicked bondholders rushed to buy insurance against the nation going bankrupt.  The price of the bond-bust insurance, called a credit default swap (or CDS), also shot through the roof.  Who made a big pile selling the CDS insurance?  Goldman.

And those rotting bags of CDS’s sold by Goldman and others? Didn’t they know they were handing their customers gold-painted turds?

That’s Goldman’s specialty.  In 2007, at the same time banks were selling suspect CDS’s and CDOs (packaged sub-prime mortgage securities), Goldman held a “net short” position against these securities. That is, Goldman was betting their financial “products” would end up in the toilet. Goldman picked up another half a billion dollars on their “net short” scam.

But, instead of cuffing Goldman’s CEO Lloyd Blankfein and parading him in a cage through the streets of Athens, we have the victims of the frauds, the Greek people, blamed.  Blamed and soaked for the cost of it.  The “spread” on Greek bonds (the term used for the risk premium paid on Greece’s corrupted debt) has now risen to — get ready for this––$14,000 per family per year.

Euro-nation, the secret Geithner memo, and the Ecuador connection

Why did the Greek government throw its nation’s fate into Goldman’s greasy hands?  What the heck was in the “RESTRICTED” document? And why did I have to take it to Geneva, to throw it down in front of the Director-General of the WTO for authentication, a creepy French banker I otherwise wouldn’t bother to spit on, and then tear off to Quito to share it with the grateful President of Ecuador?

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Big Banks Keep Paying a Pittance to Settle Fraud Charges

By Pat Garofalo | Nation Of Change
October 23 2011

CitiThis week, Citigroup announced that it had settled with the Securities and Exchange Commission over charges that the mega-bank misled investors in a derivatives deal and then bet against them. Under the terms of the settlement, Citi agreed to pay $285 million.

Citi is not the first bank to settle these sorts of charges with the SEC. Previously, Goldman Sachs had agreed to a $550 million settlement, while JP Morgan Chase paid $154 million. (Goldman’s settlement was over the now infamous “shitty deal.”)

Having to fork over hundreds of millions of dollars may seem like a lot, but it’s chump change to these banks. Citigroup, for instance, just announced profits of $3.8 billion for the last quarter alone, while JP Morgan made $4.2 billion. Goldman Sachs this week announced just the second losing quarter since the bank went public in 1999, but it paid its SEC settlement in 2010, a year in which the bank made $39.2 billion overall.

And as ProPublica pointed out, Citi’s settlement will not only cost it a pittance, but ends the SEC’s inquiries into the vast multitude of junk the bank peddled onto its unwitting customers:

The bank says it has settled all of its potential liability to a key regulator – the Securities and Exchange Commission — with a $285 million payment that covers a single transaction, Class V Funding III. ProPublica first raised questions about the deal [1] in August 2010. In announcing a case, the SEC said it had identified one low-level employee, Brian Stoker, as responsible for the bank’s misconduct.

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