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Weekend Assaults: Dominique Strauss-Kahn, Greece, and Goldman Sachs

Posted by Larry Doyle on May 16, 2011 6:17 AM |

What a weekend. I would like to comment on two specific situations.

1. Dominique Strauss-Kahn

Just when you think the world could not suffer any further ‘assaults’ from global financial executives on our sense of decency and the virtuous pursuit of truth, transparency, and integrity, enter IMF chief Dominique Strauss-Kahn. While Kahn obviously is innocent until proven guilty and is entitled to due process, his arrest this weekend in New York City on charges of attempted rape, sexual assault, and unlawful imprisonment upon a hotel maid evinces many reactions including:

1. Did he not have other things on his mind worrying about an imminent Greek default and/or restructuring of Greece’s financial debacle?

2. Do you think this is the first time he has engaged in this type of behavior?

3. Do you think that knowledge of these types of behaviors – if they have occurred previously – could lead to chances that Kahn and ultimately the IMF effectively be extorted?

4. Here’s hoping our criminal justice system operates with a blind eye and that New York Police Commissioner Raymond Kelly gets personally involved in making sure ‘justice is done.’

5. Do you think Kahn really needed the $3,000 room? Out of touch with reality perhaps?

6. You can rest assured the boys on the Wall Street trading desks will have a grand old time bantering jokes about Dominique today. Please share.

2. Greece and Goldman Sachs

At some point, Greece will inevitably default on or restructure its debt. Anybody involved in finance knows this is a virtual certainty. What many may not know, though, is the extent to which Wall Street aided and abetted Greece in disguising and hiding its true financial position. Really? Oh yes.

Wall Street is exceptionally talented in structuring derivative transactions that may not break the letter of the law but certainly press hard upon the spirit of the law. Wall Street gets paid handsomely in the process.

On this topic, I had referenced Goldman Sachs’ role in facilitating Greece’s disguising of its true level of debt in my appearance on CNBC in March 2010. Did Goldman merely execute one transaction with Greece to help it disguise its true financial position? Why would these parties want to do that? In the spirit of  “if one beer is too many and a thousand is not enough,” we learn Greece Had 13 Off-Market Transactions With Goldman To Hide Its Debt:

Greece had 13 off-market derivative contracts with Goldman Sachs, most of which swapped Japanese yen into euro in a 2001 transaction aimed at concealing the true size of the nation’s debt, according to the European Union’s statistics office.

The amount borrowed through the swaps was due to be repaid with an interest-rate swap that would have spread payments through 2019, Eurostat said in a report yesterday. In 2005, the maturity was extended to 2037, the report said. Restructuring the swaps spread the cost over a longer period, leading to an increase in liabilities and debt, Eurostat said.

Repeated revisions of Greece’s figures, beginning in 2009, spurred a surge in borrowing costs that pushed the country to the brink of default and triggered a region-wide debt crisis.

The use of off-market swaps, which Greece hadn’t previously disclosed as debt, let the country increase borrowings by €5.3bn, Eurostat said in November.

Eurostat said most issues surrounding the swaps were resolved in September, when Greece agreed to correct its debt figures.

Speechless? Enraged? Ready to give up wondering what the hell is really going on in the world? All of the above?

Does the stench from the pigsty occupied by the likes of Kahn and others who would ‘profit’ while abusing their position overwhelm you?

I can understand, but encourage you to stay the course. Rest assured that while bulls and bears operate everyday on Wall Street, ultimately ‘pigs get slaughtered.’

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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