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:
- Alan “Bubbles” Greenspan Returns to Gold
Faking It Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. […] The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. — Alan Greenspan, 1961 He was in it for the power and the glory... Alan Greenspan gets presidential bling...
- End of an Era: The Rise and Fall of the Petrodollar System
The Transition “The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better.” Ron Paul A new oil pipeline is built in the Saudi desert... this one is apparently destined for the Ghawar oil field, one of the oldest fields in Saudi Arabia...
- Writing on the Wall
Time to Sell... Maybe BALTIMORE – Yesterday, the S&P 500 hit a new all-time high. And the Dow just hit a new record close as well. If you haven’t sold yet, dear reader, this may be one of the best times ever to do so. It's still flying... sorta. Meet Bill Bonner's tattered crash flag Image credit: fmh We welcome new readers with a simple insight: Markets are contrary, pernicious, and downright untrustworthy. Just when the mob begins to bawl most loudly...
- Gold – Eerie Pattern Repetition Revisited
Gold Continues to Mimic the 1970s Ask and ye shall receive... we promised we would update the comparison chart we last showed in late November in an article that kind of insinuated that it might be a good time to buy gold and gold stocks (see: “Gold and Gold Stocks – It Gets Even More Interesting” for the details). We are hereby delivering on that promise. A Lydian gold stater from the time of the famously rich King Croesus, approx. 570 BC. It seems they already had this...
- A Fully Automated Stock Market Blow-Off?
Anecdotal Skepticism vs. Actual Data About one month ago we read that risk parity and volatility targeting funds had record exposure to US equities. It seems unlikely that this has changed – what is likely though is that the exposure of CTAs has in the meantime increased as well, as the recent breakout in the SPX and the Dow Jones Industrial Average to new highs should be delivering the required technical signals. The bots keep buying... Illustration via...
- The Central Planning Virus Mutates
Chopper Pilot Descends on Nippon Readers are probably aware of recent events in Japan, the global laboratory for interventionist experiments. The theories of assorted fiscal and monetary cranks have been implemented in spades for more than a quarter of a century in the country, to appropriately catastrophic effect. Amid stubbornly stagnating economic output, Japan has amassed a debt pile so vast since the bursting of its 1980s asset bubble, it beggars the imagination. A...
- Destination Mars
Asset Price Levitation One of the more preposterous deeds of modern central banking involves creating digital monetary credits from nothing and then using the faux money to purchase stocks. If you’re unfamiliar with this erudite form of monetary policy this may sound rather fantastical. But, in certain economies, this is now standard operating procedure. The “Tokyo Whale” Haruhiko Kuroda explains his asset purchase madness with a few neat little slides. Photo credit:...
- America Has Become a “Parasitocracy”
Dread and Denial So, let’s return to the discussion you can’t have with your congressman, your mailman, or your barmaid. It’s the important one. It concerns what the Fed is really up to. Eight years after achieving independence, a State modeled after the British merchant state was established in the US. It took a while for the Deep State to consolidate itself within it, a process that was accelerated greatly in the run-up to and aftermath of WW I. Illustration by Ana...
- Fat People for Trump!
Alphas and Epsilons BALTIMORE – One of the delights of being an American is that it is so easy to feel superior to your fellow countrymen. All you have to do is stand up straight and smile. Or if you really need an ego boost, just go to a local supermarket. Better yet, go to a supermarket with a Trump poster in the parking lot. The protest vote attractor with the funny hair. Image credit: Liberty Maniacs Trigger warning: In the following ramble, we make fun of...
- Long Term Market Perspectives
Methuselah Tree When looking for a good theme for this post I pondered for a while and then decided to use a picture of a bristlecone pine, which are widely considered to be the oldest living trees in the world. Ye olde bristlecone Photo credit: Kosta Konstantinidis You can find them near the Nevada/California border and if you wind up traveling in the area then I strongly recommend that head over to Bishop and from there head up high up into the White...
- EU Sends Obsolete Industries Mission to China
“Tough Negotiations” The European press informs us that a delegation of EU Commission minions, including Mr. JC Juncker (who according to a euphemistically worded description by one of his critics at the Commission “seems often befuddled and tired, not really quite present”) and European Council president Donald Tusk, has made landfall in Beijing. Their mission was to berate prime minister Li Keqiang over alleged “steel dumping” by China and get him to cease and...
- Celebrating 45 Years of Phony Money
$300 Trillion in Debt DUBLIN – After our trip to Las Vegas, we spent one night in Baltimore and then got on another airplane. Standing in line, unpacking bags, getting zapped by X-ray machines – it has all become so routine we almost forget how absurd it is. Get ready to be invaded, citizen... Photo by David McNew / Getty Images While armies of TSA agents pat down grandmothers and Girl Scouts, ex-soldiers take aim at the police... nutcases run...