New shit has come to light... Well sure, look at it! Young trophy wife, I mean, in the parlance of our times, owes money all over town has big bonuses to pay out... but what I'm saying, she needs money, and of course they're gonna say they didn't get it, 'cause she wants more, man, she's gotta feed the monkey... It's a complicated case. Lotta ins. Lotta outs. And a lotta strands to keep in my head, man. Lotta strands in old Duder's...
—from the Big Lebowski
There are new revelations from Lloyd's World. New shit has come to light. Lotta ins, lotta outs here. It's a complicated deal, man, lotta stuff to keep in old Duder's head...
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....
Total borrowing need in 2010 is 53.2 billion euros, or 21.8% of GDP. This is down by 13 billion from 2009 and includes 12.95 billion in interest payments, a primary deficit of 10 billion euros and redemptions of 30.23 billion...
The nations most at risk in Europe still are countries such as Greece (expected by the European Commission to reach a debt-to-GDP ratio of 120% this year), Ireland and Portugal.
These countries aren't outliers. Some of the world's largest economies, including the U.S., U.K. and Japan are already above the 90% mark or will be soon, suggesting the economic drag from sovereign indebtedness will be global...
Greece spurned the Squid's most recent offer to speed them along the Road to Hell, but previous offers were accepted.
As in the American subprime crisis and the implosion of the American International Group (A.I.G.), financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.
In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.
Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities...
“Politicians want to pass the ball forward, and if a banker can show them a way to pass a problem to the future, they will fall for it,” said Gikas A. Hardouvelis, an economist and former government official who helped write a recent report on Greece’s accounting policies.
Lotta ins, lotta outs.
Derivatives do not have to be sinister. The 2001 transaction involved a type of derivative known as a swap. One such instrument, called an interest-rate swap, can help companies and countries cope with swings in their borrowing costs by exchanging fixed-rate payments for floating-rate ones, or vice versa. Another kind, a currency swap, can minimize the impact of volatile foreign exchange rates.
In 2005, Goldman sold [an] interest rate swap to the National Bank of Greece, the country’s largest bank, according to two people briefed on the transaction.
In 2008, Goldman helped the bank put the swap into a legal entity called Titlos. But the bank retained the bonds that Titlos issued, according to Dealogic, a financial research firm, for use as collateral to borrow even more from the European Central Bank.
Edward Manchester, a senior vice president at the Moody's credit rating agency, said the deal would ultimately be a money-loser for Greece because of its long-term payment obligations.
Referring to the Titlos swap with the government of Greece, he said: “This swap is always going to be unprofitable for the Greek government.”
This story was originally reported in Der Spiegel's How Goldman Sachs Helped Greece Mask It's True Debt.
But in the Greek case the US bankers [Goldman Sachs] devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks...
Also see Goldman's Trojan Currency Swap.
I'm just going to go find a cash machine...
Well, okay, you're not privy to all the new shit, so uh, you know, but that's what you pay me for...
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Posted by: xanax | 08/03/2011 at 03:23 PM