Greece-Goldman Sachs Deals Were 'Completely Scandalous' - And Perfectly Legal: Martin Wolf (VIDEO)

The huge currency swap deals that Goldman Sachs arranged with the Greek government were at once completely legal and completely scandalous, says Martin Wolf, the chief economics commentator at the Financial Times.

Wolf sat down with Aaron Task of Yahoo Tech Ticker recently and discussed the deals that helped the Greek government hide billions in liabilities and earned Goldman Sachs some $1 billion in fees.

Though Goldman Sachs has been widely criticized of late for a 2002 deal that helped Greece mask its debt, blaming the bank is something of a "red-ish herring," Wolf said. "Goldman didn't break the law. People knew what they were doing and it wasn't a big deal...it was allowed," Wolf said. "It's another indication of ways in which governments connived with the financial sector all over the world to do things they really shouldn't have allowed to happen."

Part of the problem, Wolf argued is that world governments have been allowed to move liabilities off of their balance sheets. In short, they've adopted the Enron playbook. "Enron accounting has unfortunately become a salient characteristic of sovereign balance sheets long before Enron started."

Here's Wolf:

"The accounts of our governments are a scandal. They're complete scandalous and the U.S. is not an exception. It's just one of many governments whose accounts that tell us nothing about the true state of its finances and the long-term obligations association with that. We would never allow that with any private business."

WATCH:

Comments

[4600 dollars and 2 cents]

11:58 PM on 03/03/2010

A better question might be, how is the US economy NOT like enron?

[bender86]

10:56 AM on 03/03/2010

Its easy to blame the banks but people need to take responsiblity. Sure Goldmans was unethical but so are the majority of Greek taxpayers. People want all sort of benefits that they don't want to pay for, and hence unscrupulous politicians promise them that they'll deliver. They can't raise taxes but they want to buy votes with benefits so they use some financial wizardry to move it off balance and payable often decades in the future. So the tax payer of today,and the politicians of today robs the tax payer of tommorrow and Goldmans take their fee. Many American governments today are doing a similar fraud using social security to cover their increasing debt.

I doubt any politicians who cause these frauds will see their pensions curbed to fund the inevitable savings. Its much like the bonuses paid to bank staff in institutions that were bailed out, even they caused the problem they won't tighten their own belt to pay back the debt.

[PS9]

08:30 PM on 03/03/2010

Goldman was not at all unethical.

[4600 dollars and 2 cents]

12:07 AM on 03/04/2010

that's right, not one of goldman's actions could scarcely be construed as unethical at any time.

[PhilipTaylor]

03:35 AM on 03/03/2010

SWAPS AGAIN T0 BLAME! IT IS TIME T0 CUT THE SNAKE’S HEAD 0FF: BAN DERIVATIVE INCENTIVES T0 BANKERS WH0 PR0FIT FR0M 0THERS L0SSES!

When people can gain from others' demise they push the market in ways that damage more than just portfolios but an entire country is now in jeopardy.

Athens had a great vibe one year ago: cafes full, construction around the Acropolis, and a new museum was garnering international buzz ready to opening. Greece was coming up on its 10th anniversary of joining the euro and was seemingly benefiting from it.

NOW.

Greece's debt problems grow amid recent downgrade warning and news FED plans to look at Goldman's derivatives with Greece.

Greece is crumbing like its many ancient ruins. So quickly, so dramatically? Greece's public debt is in danger of defaulting on its loans and could have dire results for European and even the common currency and may impact others in the area.

FED’s Bernanke told a US Senate panel they are looking into G0LDMAN derivatives deal made with Greece jeopardizing an entire country.

"It's like buying fire insurance on your neighbor's house -- you create an incentive to burn down the house," Philip Gisdakis, at UniCredit in Munich, said in the New York Times.

The word "ethics" is actually derived from the Greek "ethikos." It means the discipline dealing with what is good and bad, and with moral duty and obligation.

The world needs such a new set of financial disciplines. Just ask the Greeks themselves.

[travelah]

08:26 PM on 03/02/2010

It is not like Enron. It is a picture of the path the Democrats are forging ahead on. It is European Social Democracy at it's best. Every 4 or 5 weeks, this country has to refinance half a $Trillion dollars and when the Fed stops printing the money, you are going to feel like your being greeked.

[EWeiss]

11:33 PM on 03/02/2010

How is privatizing federal accounting "Social Democracy?" It has nothing to do with it, of course.

Your post is just rhetoric with nothing behind it.

[travelah]

08:37 AM on 03/03/2010

Greece arrived at their present circumstance by means of "social democracy". That is the path Obama has chosen and is working toward. Greece is what Obama will take us towards

[cyoohoos]

04:00 PM on 03/02/2010

Isn't that what Bush did when he decided to fight wars 'off the books'?

[travelah]

08:27 PM on 03/02/2010

He didn't fight anything "off the books". He submitted separate appropriations yet the total is included in total spending.

[EWeiss]

11:31 PM on 03/02/2010

Wrong - the cost was never part of the regular budget so it was never included in the deficit figures.

Remember: as soon as Obama brought the two wars into regular appropriations, political hacks were able to say that he'd "quadrupled the deficit". After he'd been in office for two weeks. If they were already in the annual budget that accusation would have never been made.

[ussmls]

03:17 PM on 03/02/2010

It seems that our people have kept their heads in the sand when it comes to politcians,bankers,the MSM, the regulators(SEC,CFTC,FDIC,Federal Rerserve) for the last 100 years or so. The guy that tip off the SEC on Madoff is one of a few people who knows what has really been happening to our great nation and what will fix it. Its the huge spending & waste by gov programs that has put us in the same shape as Greece,Spain & the UK. I sat and listen to him on www.kingworldnews.com today & what he said is no where in any of the MSM interviews, so you might want to hear what Markopolos had to say about GS,Madoff & the SEC,plus he took a good hit on both political parties that is way pass due! These TBTF banks & the people that run them have way to much control & need to be broke up. The toxic derivatives that they produced,packaged & then sold as good assets has never been truely vauled, so that means the books are cooked to where they can continue to rake in billions in profits to get those huge bonuses. I have found that "Kingworldnews.com & zerohedge.com has more correct truth in them than all the MSM combined,period! I hope you take the time to hear Markopolos befor the movie comes out, & please have something to take your anger out on so you want hurt yourself or some else! Good listening!

[boyer37212]

02:51 PM on 03/02/2010

If I'm not mistaken, Wall Street firms like also went around to towns and cities in the U.S., proposing and executing deals to "fix" their debt, with the result being much like the mortgage crisis -- cities suddenly found themselves unable to pay obligations.

These deals were presented as "sure-things" yet often utilized a lot of smoke and mirrors to hood-wink local and state goverment leaders into going along.

Yeah, the powers-that-be should have been more alert and done due-diligence, but much like the fine print on mortgage contracts, the Wall Street guys mislead people.

I know one of these Wall Street guys who got his MBA at Vanderbilt, went to Wall Street, and came back twelve years later with $100,000,000 in his bank account.

I have no problem with making money, but pilfering is an entirely different deal.

[blueskybigstar]

02:48 PM on 03/02/2010

What about our representatives who have consistently voted against the laws that have put our country near calamity?

Reply Favorite Flag as abusive Posted 10:21 AM on 3/02/2010

- dtmfman Unfan 37 fans permalink

That is covered in my second paragraph....

There should be a street full of criminal transport buses parked outside the capital...and one by one...the building should be emptied....and loaded into those buses...then driven over a cliff...just like congress sold out America and drove our economy and manufacturing over a cliff....this is one time I agree with "an eye for an eye"....

Reply Favorite Flag as abusive Posted 01:14 PM on 3/02/2010

-blueskybigstar 373 fans permalink

The Bush administration completely changed my views about capital punishment. Now I am pro. I believe it should be used when people put our government in danger like leading us to false wars, changing laws that make us vulnerable, allowing huge criminality, causing mayhem and blaming it on a false enemy, working with foreign nations to disrupt our political system, and election fraud, such as there was in 2000 and 2004.

[Grin-and-tell]

02:34 PM on 03/02/2010

If Obama cared about even trying to tell us the full-picture, instead of concealing everything, he'd surely have had the DNC include Wall St. reforms and TBTF among the 15-or-so issues that they asked me to rank in order of importance (on the twice-mailed questionairre/fund-raising letter I've received from them). As if I'd ever give them $2000 again.

"Improving race relations", however, was on the list (which tells me that Rahm and company think BO's one-time supporters are still viewing him in hero-worship mode).

But nothing about the biggest and most critical issue of our times (and one that's like a speeding-train without brakes that's barreling into our economic future's).

So, congrats Republicans and lite-Republicans (a.k.a. D.I.N.O.'s) Maddow and Olbermann will still be spending their broadcasts detailing Palin and Bunning's latest flubs and lies.

So no one is there to hold Obama's feet to the fire about his refusal to even try listening to the Reich's, Wolf's or Simon Johnson's of the world.

They have simply calculated how seemingly unlikely it will be for the Blankfein's of the world to face their eventual comeuppance French Revolution style.

But by emboldening these criminals-- who already own 97% of the $205 trillion in total notional derivatives and therefore are beyond the reach of our money-run government-- they have concurrently guaranteed that this day of reckoning is as inevitable as the rising sun.

[blueskybigstar]

02:56 PM on 03/02/2010

Fanned. You need to see this.

http://www.freespeech.org/node/2449
http://www.tomflocco.com/fs/FbiMemoPhotoLinkBushJfk.htm
http://www.tomflocco.com/fs/FiredAttorneysFraudProbe.htm

and about our secretary of defense Robert Gates and the MIC
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x2970145
http://aangirfan.blogspot.com/2008/11/robert-gates-lockerbie-october-surprise.html
http://struggle.ws/mexico/usa/cia_drugs.html

[EWeiss]

11:38 PM on 03/02/2010

If you expect a President from either major party to put a dent into American style capitalism you're going to be disappointed every time.

I mean I supported Obama too. Still do. But I would never kid myself about who owns the US government.

[DavidWyld]

02:21 PM on 03/02/2010

Scary stuff all around - the "full faith and credit" of government sure ain't what it used to be!

David http://wyld-about-money.blogspot.com/

[DiogenesOfAlaska]

01:54 PM on 03/02/2010

ok, it was perfectly legal.

But GS shouldn't have earned a fee of close to one billion $ for it.

Gee, I could have structured that deal for much less. But the Greeks wouldn't trust my name. They can be such snobs.

I bet there wasn't a big competition. I just can't seem to recall any ads saying: Greece seeking help with hiding their public debt. Applicants should have a basic understanding of currency swaps.

[sonofsamphm1c]

02:59 PM on 03/02/2010

I have one source that says they earned 200 million and another that claims 300 million. Where did you get one billion?

[DiogenesOfAlaska]

04:21 PM on 03/02/2010

from the above post.

It's funny that the link provided will lead you to the Google result where you can then make your pick. The one billion was reported in businessweek.

[garymc8]

01:51 PM on 03/02/2010

THEY WILL NEVER STOP CHEATING AND STEALING. GREEDY OLD PIGS

[bayviking]

01:46 PM on 03/02/2010

So after exhibiting exactly the same behaviors Enron is prosecuted and Goldman-Sachs is not. Fraud has many tricks, faces and unnecessarily complicated storylines, but its still fraud, and fraud is illegal. The key to carrying out the frauds for profit is insider information and manipulation. To keep those bags of money requires political power, but that doesn't make it right.

[bender86]

11:09 AM on 03/03/2010

In this case the Greek Government is Enron.

[Violinhunter]

01:32 PM on 03/02/2010

Making something legal does not make it right. Hitler operated legally when he put the Jews to sleep also. Remember that. This is seriously evil and we will all reap what these men have sowed. Let's not pretend. These are fully aware individuals playing games and acting stupid in front of the cameras. Shame.

[sonofsamphm1c]

03:07 PM on 03/02/2010

Wow.

[tuberider]

01:22 PM on 03/02/2010

A generation of good minds were set with the Challenge: How much can you steal and still be legal....? They've been hugely successful.