In remarks before a UK parliamentary committee yesterday, Goldman Sachs executive Gerald Corrigan addressed the controversy surrounding the swap deals that his bank arranged on behalf of Greece, saying “standards of transparency could have been and probably should have been higher.”
On the heels of this transparency speech, however, Goldman Sachs has made it quite clear that it will continue to exploit regulatory loopholes to keep the public in the dark about what, exactly, it is doing in the Greek debt markets and elsewhere.
I spoke to a Goldman Sachs representative yesterday following Corrigan’s speech and asked if the bank would share more information about its activities in the Greek debt markets now that it had identified a lack of transparency as a central problem in its dealings with Greece. More specifically, I asked if the bank would disclose a catalogue of its recent positions in sovereign credit default swap (CDS) markets. Sovereign CDS are unregulated securities, traded in opaque markets, which speculators have used to bet on the likelihood of a Greek default.
The answer, of course, was no: Goldman Sachs has no further disclosures at this time.
This data would reveal whether Goldman Sachs was, as rumor has it, speculating heavily against Greek debt at the same time that it was playing a central role in addressing the country’s debt situation.
To review: rumors that Goldman Sachs is one of the speculators attacking Greek debt have been swirling for some time, most recently with French journalist Jean Quatremer reporting that corroborating sources had informed him that this is the case.
At the same time, Goldman has been intimately involved in helping Greece navigate its financial crisis. In November, President and COO Gary Cohn tried to sell Goldman on another shady swap deal. Greece didn’t bite, but since then, the bank has played a key role in efforts to “rescue” Greece, according to the Financial Times. In late January, CDS spreads stabilized on news of an oversubscribed Greek bond deal. A few days later, the FT article reported that Greece had hired Goldman to sell bonds to China — seen as a fairly desperate move by the markets — and CDS spreads began hitting new records.
Given this intimate knowledge of and involvement in Greek financial affairs, it would be truly scandalous if Goldman Sachs was, as rumored, one of the speculators attacking Greek debt. Not that it would be very surprising; it’s perfectly in keeping with the bank’s past behavior.
Transparency would certainly help quell the rumors. But without any data, we only have the past as a guide to what Goldman is doing in Greece. And the past isn’t pretty.