Congress Needs to Clip Goldman's Wings

The New York Times' front page exposé on the role that Goldman Sachs has played in the Greek tragedy unfolding in Europe right now raises a huge number of concerns both for the U.S. economy and the financial reform measures now in Congress.

To recap, Greece and a number of other European Union (EU) countries are dangerously in debt. EU rules say member countries cannot have budget deficits that exceed three percent of GDP. Greece's debt is closer to 12 percent. Other countries including Spain, Ireland, Italy and Portugal are also in trouble. These countries are "too big to fail." A default by any one of them would rock the global markets, putting an end to the hopeful signs of an EU recovery and potentially leading to a "double dip" recession here in the United States.

Greece and perhaps the other EU nations have been hiding the extent of the debt for years. This week, it was revealed that they have been able to do this with the aid of major U.S. players like Goldman Sachs. The German magazine Der Spiegel broke the story that Greece did a billion-dollar currency swap with Goldman Sachs in 2002 that did not show up on the nation's books as debt.

Deals of the Gods?

Yesterday, the Times reported that there was a series of Goldman Greece deals that those chuckleheads at Goldman named after figures in Greek mythology. One of the deals was called Aeolos, after the god of the winds.

"Aeolos, a legal entity created in 2001, helped Greece reduce the debt on its balance sheet that year. As part of the deal, Greece got cash upfront in return for pledging future landing fees at the country's airports. A similar deal in 2000 called Ariadne devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans, despite doubts by many critics," reports the Times.

Off Book Deals

It walks like a loan, talks like a loan, but because it was actually a complex derivative deal, it was secret, bilateral, and off-book. No one knows how many of these deals there are underpinning the EU's debt numbers or the U.S. debt for that matter.

What the Times story missed is that right now neither the House financial reform bill nor the Senate proposal cover these types of currency swaps. While both bills attempt to to bring some degree of transparency to derivatives trades, they do not cover currency swaps. Why not? Well, this is a bit odd: the Federal Reserve does not want these deals covered.

While there is no evidence that the Federal Reserve is engaging in these types of currency swaps with banks from other nations, their objections to having these deals be made on open, transparent exchanges should ring some alarm bells. The U.S. also has substantial debt. Why tempt fate or creative accountants to borrow off book?

Flying Too High

Like Icarus, Goldman and other big banks, like JP Morgan, who have engaged in these massive deals, are flying a little to close to the sun. As concern about the Greek situation mounts, and as the worrisome implications for the health and well-being of the U.S. economy are become clearer, the big banks are doing their best to illustrate why major financial reform is needed and why no derivative trading should be off book.

The Senate needs to clip Goldman's wings and make sure that all derivatives are traded on an open exchange to provide the maximum level of transparency for the U.S. and the world.

Mary Bottari

Mary Bottari is a reporter for the Center for Media and Democracy (CMD). She helped launch CMD's award-winning ALEC Exposed investigation and is a two-time recipient of the Sidney Prize for public interest journalism from the Sidney Hillman Foundation.


Thanks for exposing how corrupt banks like Goldman Sachs are. The worse thing is that they profit from crisis all the time while the average person continues to suffer. I think the financial crisis has shown us that this is what they continue to do and that somebody needs to stop them before they cause a global meltdown. We also need to elect public representatives that will actually stand up to them instead of doing whatever they ask. We all know that these corporate executives and politicians are attending each other's weddings and buying their daughter's wedding shoes, while we at home suffer from less and less money to eat. Valerie

Obama sold his soul to Goldman Sachs his # 2 contributor...! We never had a chance, we were betrayed before he even took the oath of office... We needed to Nationalize these corrupted banks to reform them properly and Obama is blocking reforms, as he did with the need for strict international regulations...Sarkozy and Merkel called for... All this debate is pedantic...Change is off the never left the kitchen...!

Well, it seems that Congress is not taking public interest seriously, with a recent report showing that Congress wasted more then ever in the history of USA, Congress seriously needs help. I think the main focus of Congress should be to save money and allocate funds to the well-being of general public.

Greece crisis will definitely not only ruin the lives of its people but also the image of European Union and this nasty deal of Goldman Sachs will affect the US economy too. But I think it is the time to learn from experience from past and America and Congress should stop playing with the lives of others. It would be better to concentrate on US economy. For more details on this topic visit

I'm so tired of hearing about Goldman again and again... Next topic please. :)

Designed through the same Goldman Sachs associated with provoking the united states sup-prime mortgage turmoil, odds now stand that this Greek debt disaster carries a huge possibility to de-rail the EU but additionally to turn around to the USA economic system also ... Curiously, the dirtier things turn out to be, the clearer the reasons connected. Have them all trowned, every last 1 of these.They enjoyed their opportunity so they blew it. Period to 'fess up and take their own medicine.

the collapse of the economy of Greece had many implications for all European Union countries, the most important issue here is whether the lesson is learned or will continue to apply the same economic policies that led to this economic disaster. <a href="">amor perfecto</a>

Paul Volcker, the legend from the 80s who tamed the inflation had several good ideas about how to change the regulations so that the financial crisis does not repeat itself. Unfortunately he was not listened to. And in my opinion, there is only a question of time when the crisis will repeat itself, probably only worse, because the countries are much more indebted than they were at the beginning of the recession.

I am wondering how come Greece never had the bad experience like some other Eastern European countries and they still can not manage to step on their feet... solutions