Goldman Sachs's Greek adventure got an in-depth look from the New York Times yesterday. The article extends on last week's Spiegel piece, which reported that the bank helped Greece hide the true extent of its debt through the use of specialized derivative products. We first reported on the parallels between AIG and Greece in a post last week, following the lead of Zero Hedge. Entry into the paper of record means the story now has legs this side of the pond, and MIT economist Simon Johnson is arguing that Goldman Sachs is set to be blacklisted in Europe.
One question looming over this story: did Goldman position itself to profit from the Greek fiasco? Did it use its special knowledge of Greek's hidden debt to build profitable bets on its future downfall and rescue? If the bank's past behavior is any guide, the answer is yes. Ignoring the impending catastrophe (obvious from their vantage point), and failing to properly "hedge" (extract massive profits), would have been "irresponsible" (insufficiently greedy/corrupt) on the part of senior management.
Considering this, hedge fund king John Paulson's role in Greece deserves far more scrutiny. I wrote about this last week, pointing out that they shared the same vulture flight pattern in Greece, but at the time did not realize that Paulson and Goldman actually partnered in executing massive and profitable bets against the subprime market. Are they doing the same with Greece?
News of Paulson's fund taking large positions against Greek debt has barely risen above rumor in the English-language press, despite this article in a Greek daily, which says that Paulson is "orchestrating the pressure on Greek government bonds and the Euro," and reports that Paulson has a team of 20-30 traders focused on Greece.
A research firm is now calling Paulson the George Soros of derivatives markets, where the bulk of speculation against European debt and the Euro is happening; the Telegraph says that so far "no hedge fund has put its head above the parapet in this destructive trade," but the rumor is that Paulson is behind it.
If Paulson is the hedge fund king behind the parapet, as rumored in English and reported in Greek, then it would seem fairly likely that Paulson and Goldman partnered -- colluded? -- to build profitable short positions against Greek debt. That Goldman was shepherding hedge fund client Paulson around Athens in recent weeks would seem to suggest that the bank and hedge fund are working together in Greece.
Paulson and Goldman have partnered before -- on the subprime short trades that won them enormous profits in the midst of the housing. Those trades have gotten a lot of attention, but the fact that Paulson and Goldman worked together to make it all happen has received much less ink. The story of Paulson's investments is detailed in Gregory Zuckerman's book, The Greatest Trade Ever. Goldman plays a prominent role, setting up the CDOs that Paulson would wager against, and then selling them to investors. The star Goldman trader who placed the bank's winning bets against the subprime market, Josh Birnbaum, was reportedly in frequent contact with Paulson, at one point encouraging him to back off his bets (perhaps to make more room for Goldman).
Since Paulson was in the room with Goldman (and several other banks) when these CDOs were first conceived, it would seem that the fund had an unfair edge over the investors that would lose their shirt buying the securities. Zuckerman notes that Deutsche Bank suffered losses because it couldn't find takers; that famous taker, AIG, may have been Goldman's convenient solution.
These parallels raise obvious questions: was Paulson also in the room with Goldman before it tried to sell Greece on a new way to hide its debt this past November? As a hedge fund client of Goldman's, did Paulson have special information about Greece's true debt situation? Are Goldman and Paulson partnering, once again, to profit from the downfall of an entire country/continent?
Cross-posted from Eyes on the Ties.
The bigger question remains: What sort of macro-design is planned for, judging by all of this systematic collusion?
Greece? Is the US next?
How about some more "in depth" looks by these great news organizations? In depth look, is an oxymoron of news organizations that want to narrow write a story and fit a narrow set of facts into it.
No bombs, no blood, just greed and arrogance.
Thailand is likely the next domino to fall, look at the strange regulations and the amount of currency going in their direction with no tangible impact on the economy, something smell there.
In a world where Bugatti Veyron buyers have to be on waiting list, this shouldn't surprise anyone.
Much of the world’s population strongly believes survival and then prosperity and happiness are a function of personal financial wealth. In reality, an empty belief system. Nothing about wealth comes up to the level of being an absolute perquisite for survival, prosperity, or happiness. Trapped within this belief system, we can only brood about the connections between war, greed, our religions, world terrorism and money. A complete understatement of human abilities. Common sense rebels. How do we tolerate this imposition to our inherent and creative capabilities?
How much of airport security would be needed under an economy of abundance? It is just a belief, yet it has persisted since a least, Hammurabi’s time. As it turns out, knowing your brain is being hacked by an ancient, Hammurabi robot doesn’t make it any easier to resist. So, it’s a process with a very, very long beard ...quaintly out of place in the technological world of collaborative design, regenerative medicine, genome sequencing, bacterials, petaflop, extaflop computations and mind blowing robotics. In the past lack of technology could be considered a cause of scarcity.