In its previous response to us, the Bank of Italy pointed out that Mario Draghi (its current governor) did not join the management of Goldman Sachs until 2002 - hence he was not there when the controversial Greek "debt swaps" were arranged.
We agree that he joined Goldman only in January 2002 (this was in our original post). But the latest revelations regarding the Goldman-Greece relationship (on the Senate floor, no less) clearly indicate that Goldman was a lead manager of Greek debt issues in spring 2002, i.e., when Mr. Draghi was on board.
This raises three entirely reasonable and straightforward questions.
- Was Mr. Draghi involved in the Goldman-Greece relationship? Sources indicate that this was very much part of his set of responsibilities, but this may be disputed.
- If Mr. Draghi was involved in marketing Greek debt, did he at that time know the true Greek debt numbers - i.e., was he aware of the "debt swap" arrangement? Perhaps his Goldman colleagues concealed that information from him.
- And when/if Mr. Draghi became aware of the inherent misrepresentation involved this transaction, did he take steps to fully informed investors (and any relevant regulatory bodies)? Again, it is entirely possible he learned of this matter only recently and from the newspapers.
Keep in mind that Mr. Draghi is still regarded as a leading contender to become president of the European Central Bank - the most important policymaking institution in the eurozone. It will be hard for anyone to advance his candidacy without clear and public answers to these questions.
Cross-posted from The Baseline Scenario.
Pretty much a broken record.
The search for truth is a prerequisite for freedom. Unfortunately, we have strayed so far away from our best traditions that even if everyone is presented with an unvarnished truth we would not know what to do with it.
Do you ever wonder why? ;-)
Politicians are supposed to be crooked! That's why Greeks elect the ones they do. Grow up Western World. These "debts" aren't worth the paper they're written on.
the riots are the government workers and pensioners complaining about the gravy train running out.
Same thing will happen here.
the blame on the debt swabs, derivatives, etc are only a smoke screen to blame the big bad wall street. Wall street did not have any votes to expand the deficit spending.
We don't treat Al-Quaida that way...so why all of the 'maybes and possibly'.
We have to call this market of worthless derivatives and credit-default swaps for what it is...SCAM!
If you chronicle back to when Hank Paulson went to London before the bail outs, he knew that Goldman Sachs was going to loose alot of money, even go bankrupt, if all those interest rate swaps imploded once the Federal Reserve hiked rates.
Well part of the bail out was to ensure Ben Bernanke would not hike rates, when his own Keynesian text book says: RAISE NOW, and that's why Greece, Italy and even states like Alabama, bought these swaps because they knew logicly that rates could not remain at 1% forever.
In fact Ben Bernanke lowered rates down to 0.0% which wiped out everybody with those swaps.
And they got away with it because the Federal Reserve is composed of the very banks it's supposed to be regulating, like Goldman and JP Morgan.
It's a racket folks....nothing more.
http://www.reuters.com/article/idUSTRE61L3EB20100222
This link shows that many countries hide debt by securitizing national assets, and this keeps debt off the books. Some countries are drowning in municipal bonds that don't show as national debt.
I would point out that the Greek swap deal wasn't kept hidden. It was off the books but in plain sight, announced and known, published in magazines, and information was available on websites of some banks (in this case, the swaps were sold to the Bank of Greece, and tBoG lists the deal under Titlos SA on its website).
Eurostat knew about it in 2002. In addition, most Euro countries did similar deals.
In other words, the deal was announced and transparent. The Europeans knew about it, and were doing similar deals themselves. The deal was legal. The problem is that European accounting law allowed for it not to be counted as national debt, and the reason for this is that a many countries were skirting debt limits. Everyone knew about these instruments, why weren't they banned?
The reason I'm responding is because I think the currency swap deal with Greece provides a whitewash for the actual collusion that took place when hedge funds did a momentum play in the Greek debt CDS market. The CDS market went from $20 billion to $80 billion recently, and caused a panic among investors in Greece, who bought contracts at a premium from the hedge funds.