Goldman Goes Rogue – Special European Audit To Follow

[grassfed]

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.

more http://baselinescenario.com/2010/02/14/goldman-goes-rogue-–-special-european-audit-to-follow/

[DFW]

1. The European Commission won't be swayed by Goldman Sachs' "need not to fail."

All their record profits of the last year had better be put in escrow, because nothing Washington can do will save them
from punishingly steep fines if it is proved they helped a member state of the EU defraud the rest.

[yurbud]

2. we need to see some Goldman execs indicted or in this case, extradited

since we don't seem to have the political will to treat these guys the way they deserve.

[grassfed]

3. Did Goldman Sachs help sink Greece?

Astonishing story over the weekend about how Goldman Sachs may have helped Greek politicians take on reckless levels of debt and deceive their Eurozone partners -- and how, more broadly, Wall Street bankers may have colluded on deals that now threaten to destabilize the entire EU economy. Simon Johnson is rightly appalled, and says what must happen next. Excerpt:

And the US government, at the highest levels, has to ask a fundamental question: For how long does it wish to be intimately associated with Goldman Sachs and this kind of destabilizing action? What is the priority here - a sustainable recovery and a viable financial system, or one particular set of investment bankers?
To preserve Goldman, on incredibly generous terms, in the name of saving the financial system was and is hard to defend - but that is where we are. To allow the current government-backed (massive) Goldman to behave recklessly and with complete disregard to the basic tenets of international financial stability is utterly indefensible.

The credibility of the Federal Reserve, already at an all-time low, has just suffered another crippling blow; the ECB is also now in the line of fire. Goldman Sachs has a lot to answer for.

Once again, we see the potential cost of allowing a morally unaccountable and politically connected elite operate in the shadows. What they did was perfectly legal -- and it might bring down the world financial system. You cannot have successful capitalism without transparency and a shared commitment to moral integrity. On the EU question, how would you feel as a German taxpayer, knowing that you were being asked to bail out corrupt and profligate Greek politicians, who got away with misdeeds thanks to the help of American bankers? And that you were told that if you didn't bite the bullet and do this, your economy could collapse? Which is what US taxpayers were told in 2008.

But we American taxpayers were at least helping out our own countrymen. It's going to be interesting, and not in a pleasant way, to see how nationalist resentments are going to shape political integration in the EU going forward. Paul Krugman says the Greek turmoil actually means European integration should continue even faster (ironically enough):

A breakup of the euro is very nearly unthinkable, as a sheer matter of practicality. As Berkeley's Barry Eichengreen puts it, an attempt to reintroduce a national currency would trigger "the mother of all financial crises." So the only way out is forward: to make the euro work, Europe needs to move much further toward political union, so that European nations start to function more like American states.

Good luck with that now, folks. Britain is in a world of financial trouble itself, but I bet they're thanking their lucky stars that they didn't accept the Euro.

http://blog.beliefnet.com/roddreher/2010/02/did-goldman-sachs-help-sink-greece.html

[indepat]

4. Let the games begin in earnest with the chips falling where they may, wounding all heels

and devouring all rogues. :P

[Doctor_J]

5. I hope that Goldman execs and Bush & Cheney receive harsh

justice from the Europeans. We're too weak to do anything about their crimes.

[Enthusiast]

8. Apparently "our" corporations

and the executive branch of government are allowed to do ANYTHING illegal as long as they turn a profit. We shall see.

[RainDog]

6. we also have to go to Europe for attempts to bring war criminals to trial

I'd say that's a indictment against the current American political system. Cheney admits to torture and is ignored.

Goldman causes financial ruin and is forgiven and given money.

I wish I had the funds to leave this country.

[RainDog]

7. delete. b/c I'm just that tired.

I say that b/c I'm just that cynical.