The Blind Spot Surrounding the 2005 'Major Restructuring' of the Goldman/Greek Secret Loan
The EU Commission was at the forefront of the response to the revelation in 2010 of irregularities in Greece's government statistics and in particular the 2.8 billion Euros secret loan it received from Goldman Sachs in 2001 (see this article at Bloomberg).
Has it delivered and has parliamentary oversight been adequate?
We tried to answer in a December 2011 article by comparing the results of a thorough audit from Eurostat with initiatives from legislative bodies in the EU and the UK and Goldman Sachs' communication (see MarketOracle). In short, there were serious lapses that point to a deception.
We revisit the issue based on additional material, an April 2010 hearing in the EU parliament (video footage included in this article) and the work of the special committee in charge of studying the causes of the financial crisis, CRIS.
The time is opportune following Nick Dundbar's recent report which reveals important details about the imbalanced relationship between Greece's debt agency and the bank (see Bloomberg). That reinforces our case that EU's officials have limited their reach to regularizing the accounts, not investigating the actions of the parties involved.
The ECB-G30 conflict
In November 2011, Corporate Europe Observatory (CEO), a Brussels based lobby watchdog, asked Mario Draghi to withdraw from the group of G30 because it conflicts with his duties as ECB President. According to them the ECB's press office dodged their criticism and, in February 2012, they referred the matter to the ethics officer of the ECB.
This referral comes as it is uncovered that Draghi stated in writing that there were no relevant personal factors to be taken into account in considering his nomination in June 2011. It is misleading because it fails to disclose a conflict of interest (Nouvel Observateur). Specifically, his son has been working for some years as an interest rate trader at Morgan Stanley (LinkedIn). The code of conduct of the ECB warns against "potential advantage for [the] families [of the Governing Council]". It's a real risk. In January 2012 the president of the Swiss National Bank was forced to resign after it was found his wife traded on insider knowledge, reported The Telegraph.
Irregularities in the nomination of Mario Draghi
The Committee on Economic and Monetary Affairs was in charge of evaluating Mario Draghi's credentials on behalf of the European Parliament. Keep in mind that, while independent,the European Central Bank is accountable to the European parliament via this Committee. The view of the Committee was described in a 36 pages report concluding to a favourable opinion to appoint Mario Draghi as President of the ECB. 75% of the MEPs approved, resulting in his appointment for a term of office of eight years with effect from 1 November 2011 by the European Council. The report ignores some strong reservations of some Committee members about his alleged role in the falsification of Greek debt. This, and other evidence, indicates a possible ethical failure. The contentious transactions were engineered by Goldman Sachs International in 2001. They were subsequently managed while Mario Draghi held the position of vice chairman and managing director of the bank's London office (European headquarter), and a member of the firm-wide management committee, from 2002 to 2005. In particular, a significant increase in the debt hiding scheme, engineered in 2005, has yet to be addressed in relation with this nomination.
Greek/Goldman 2001 deal, overlooked aspects, and open questions
In 2001 the Greece ministry of finance hired Goldman Sachs to enhance its books using derivatives. This became known in 2003. Two noticeable events occurred in 2010.
First, the EU mandates audits into Greece’s national accounts, uncovering huge irregularities, including those related to the 2001 deal. This received financial media coverage (Wall Street Journal…). It was suspected, then, that, in addition, Goldman Sachs shorted Greek debt which, on the face of it, is a market abuse. The final audit, however, came at a time when the media coverage had dissipated: we will see that it's unfortunate.
Second, Goldman Sachs’ wrongdoing in the subprime crisis was made official by the SEC and congressional investigations. The EU authorities and the UK (Gordon Brown) declared that they would carry out due diligence checks on this issue, in cooperation with the US.
Most read in the last 20 days:
- The Baby Boomer Survival Guide (Part I)
The Yellow Machines Go Silent PARIS – What should you do if you are running out of time and money? This is the question we get from readers over 50… over 60… and sometimes over 70. We baby boomers were famously “na… na… na… live for today.” Now, it’s tomorrow. And many of us – often through no fault of our own – are having trouble making ends meet. At the Diary, we write about the world of money. About economic policy and how it affects you. But what if,...
- Tell us Ron, What's the Plan, What's the “Austrian” Plan?
What? No Austrian Prescription? Bloomberg Reporters Cannot Believe It This is truly funny. Ahead of the FOMC decision, Ron Paul, who is well-known as an an implacable critic and enemy of the Fed and a fan of the Austrian School of Economics, was interviewed at Bloomberg as to “what the Fed should do”. What makes it so funny is that the Bloomberg reporters seemingly cannot believe that Austrian economists simply have no “prescriptions” for the Fed. They keep pushing Ron Paul for...
- EU Moloch in a Fresh Bid to Inflate
Brussels Alters Capital Requirements to “Spur Lending” Saints preserve us, the central planners in Brussels are giving birth to new inflationist ideas. Apparently the 2008 crisis wasn't enough of a wake-up call. It should be clear by now even to the densest observers that a fractionally reserved banking system that flagrantly over-trades its capital is prone to collapse when the tide is going out. 2008 was really nothing but a brief reminder of this fact. The political and...
- Refugee Crisis Blowback
A Sharp Turn in Swedish Politics When we recently discussed Europe's refugee crisis, we mentioned that a sizable political backlash was to be expected and that unfortunately, extreme nationalist parties were likely to be among the main beneficiaries. We also mentioned the situation of Sweden, where the mainstream political parties in an ongoing fit of political correctness bordering on lunacy have apparently decided to transform Sweden into a province of Mesopotamia. Leader of...
- US Stock Market: A Retest or Worse?
Gray Swans and Black Swans By Monday's close, the S&P 500 Index was closing in on the low established in the August swoon – such a retest was essentially our minimum expectation, as V-shaped rebounds are very rare. The question is now whether it will only be a retest, or if something worse is in the offing. No-one knows for sure of course, but we'll briefly discuss what we are looking at in this context. Image via NYTimes It is interesting that as the market...
- The Baby Boomer Survival Guide (Part II)
A Lehman Moment for Commodities? LONDON – Today, we continue our philosophical look at what you should do if you are running out of time and money. (You can catch up on Part I here.) Where do we begin? With how to add wealth? Or how to lose it? The way to lose it is simple. You buy something that is not worth the money you paid for it. You are instantly poorer, whether you know it or not. The pleasingly plump. Illustration by jdeer69 DJIA, daily...
- Climate Fanatics Run Into Public Relations Snag
Scientists Turn into Stalinists Last week, we happened to stumble across a press report about a group of climate scientists so eager to shut up their critics that they want to employ the State's police, courts and jailers for the purpose. Specifically, a group of academic (and presumably tenured) climate alarmists supporting the “CAWG” theory (CAWG=”catastrophic anthropogenic global warming”) have written a letter to president Obama, attorney-general Lynch and OSTP director...