This sort of crap needs to result in the corporate death penalty for the firms involved — and maybe the literal one for officers imposed by the nations these institutions screwed.
On the day the 2001 deal was struck, the government owed the bank about 600 million euros ($793 million) more than the 2.8 billion euros it borrowed, said Spyros Papanicolaou, who took over the country’s debt-management agency in 2005. By then, the price of the transaction, a derivative that disguised the loan and that Goldman Sachs persuaded Greece not to test with competitors, had almost doubled to 5.1 billion euros, he said.
Papanicolaou and his predecessor, Christoforos Sardelis, revealing details for the first time of a contract that helped Greece mask its growing sovereign debt to meet European Union requirements, said the country didn’t understand what it was buying and was ill-equipped to judge the risks or costs.
“The Goldman Sachs deal is a very sexy story between two sinners,” Sardelis, who oversaw the swap as head of Greece’s Public Debt Management Agency from 1999 through 2004, said in an interview.
Notice how the above is phrased. It was a “mistake.” There were “two sinners.”
Not a prayer in hell. The deal had a confidentiality agreement so Greece couldn’t go shop it. It was further designed to be unable to be unwound without a ruinous cost, which turned out to be a realized risk (duh!), designed by of course Goldman, which booked 12% of its revenue in 2001 off these deals.
The less-savvy often get taken advantage of. But the difference between a private party and a municipal or national government is that the former has a limited set of reserves and the people involved are all adults and thus responsible for their own actions — and the impact of those actions is limited to those who take them.
In the case of governments this is not true. Not only is the exposure effectively unlimited the exposure falls on third parties, in this case the citizens, who have no effective recourse if there is any recourse at all!
Never mind that the entire purpose behind these swaps was to lie to Eurostat and the Euro nations in general. That is, the intent by the Greek authorities was to commit fraud:
As first reported in 2003, Goldman Sachs used a fictitious, historical exchange rate in the swaps to make about 2 percent of Greece’s debt disappear from its national accounts.
Got it? Both parties used what they knew was a fictitious exchange rate. They made it up. It was a lie. And the intent of the lie was to hide the extent of Greece’s debt.
Eurostat claims it was never informed of Greece’s intent to use this method, and they never requested an opinion on the accounting treatment.
Someone needs to stop these people. Since private parties have no recourse other than to the courts, and the courts appear to be in the bag for the banksters, may I recommend that these foreign governments consider the use of a historical context we have in our Constituion (and they may have in theirs) — letters of Marque and Reprisal!