God’s Work or …
The Work of the Devil?

One does not have to be a financial genius to pose this question and formulate a response. The common sense provides the answer and conclusion. Enough said, enough has been written already … let’s just scan the press.

In the latest news, a full week after European Commission have acted, the US Federal Government finally lifts a finger … will it be God’s punishing finger? Time will tell but I have my doubts.

Goldman Sachs boss says banks do “God’s work”
Reuters, November 8, 2009

The chief executive of Goldman Sachs, which has attracted widespread media attention over the size of its staff bonuses, believes banks serve a social purpose and are doing “God’s work.”

Testy Conflict With Goldman Helped Push A.I.G. to Edge
The New York Times, February 7, 2010

In just the year before the A.I.G. bailout, Goldman collected more than $7 billion from A.I.G. And Goldman received billions more after the rescue. Though other banks also benefited, Goldman received more taxpayer money, $12.9 billion, than any other firm.

In addition, according to two people with knowledge of the positions, a portion of the $11 billion in taxpayer money that went to Société Générale, a French bank that traded with A.I.G., was subsequently transferred to Goldman under a deal the two banks had struck.

Goldman stood to gain from the housing market’s implosion because in late 2006, the firm had begun to make huge trades that would pay off if the mortgage market soured. The further mortgage securities’ prices fell, the greater were Goldman’s profits.

Wall Street Helped Cover Up Greek Debts, Fueling Crisis
The New York Times, February 14, 2010

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.

The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.

Goldman Goes Rogue – Special European Audit To Follow
Baselinescenario.com, February 14, 2010

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.What happened to the global economy and what we can do about it

Goldman’s Debt Swaps Are ‘Destabilizing’: Economist
CNBC.com, February 17, 2010

The European Commission should thoroughly investigate the case of debt swaps involving Greece and Goldman Sachs, as these types of operations are destabilizing financial markets, Simon Johnson, Professor of Entrepreneurship at MIT Sloan School of Management, told CNBC.com.

Goldman Sachs was widely reported to have arranged a debt currency swap transaction for Greece at the beginning of the past decade, providing it with money up front in exchange for higher payments later.

The reports sparked the European Union’s wrath and the group requested Greece to explain the debt swaps arrangements by Feb. 19.

“That’s clearly a huge affront to the EU,” Johnson, who propposed 10 questions for the EU investigation on his web site Baselinescenario.com, told CNBC.com.

“It’s more than an insult, it’s fundamentally destabilizing,” he said, adding that the debt swaps were “undermining what the EU, Maastricht want to achieve.”

Goldman Sachs officials declined to comment.

Under the Maastricht rules, EU member states’ budget deficits must not exceed 3 percent of gross domestic product (GDP), while public debt must remain under 60 percent. Press reports suggested that the swap arranged by Goldman allowed Greece to push its debt problems into the future.

Fed to Examine If Wall Street Is Betting On Default by Greece
CNBC.com with Reuters and AP, February 25, 2010

The Federal Reserve will look into a report that several Wall Street firms, including Goldman Sachs, have been betting on a default by Greece on its sovereign debt, Fed Chairman Ben Bernanke told the Senate Banking Committee on Thursday.

“We are looking into a number of questions related to Goldman Sachs and other companies in their derivatives arrangements with Greece,” Bernanke said in response to a question for Senate banking Committee Chairman Chris Dodd.

Bernanke said the Securities and Exchange Commission was also “interested” in the issue.

“Obviously, using these instruments in a way that potentially destabilizes a company or a country is counterproductive,” Bernanke said. “We’ll certainly be evaluating what we learn from the activities of the holding companies that we supervise here in the U.S.”

Bernanke was reacting to a report in the New York Times that Goldman Sachs and other Wall Street firms were buying credit-default swaps in which they would profit if Greece reneged on its debt.

It was these same kind of trades that nearly toppled the American International Group, the Times said, and is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers.

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