I'm sure this is just a thought exercise in conspiracy theory, but what if the US bailout of these companies was really just the US govt having to pay up on some of its own "off the books" shenanigans with these same companies under penalty of exposure or something similar?

Previously I wouldn't have thought it even possible given all of the safeguards (checks and balances) built into things. However, our govt has been very creative in restructuring these safeguards in recent years and much more adept at keeping a lot of things "off the books".

Greece is in trouble because its financial elite f&*^d up just like ours did here. No more than 15,000 in that population cops to having earned more than $100,000. It would appear that all those wealthy Greek shipping and industrial magnates have been cheating on their taxes for years and years. Not only that, but they've been socking away their Euros in foreign banks, draining billions of Euros from Greece, right now.

How in the world is it that anyone anywhere would think it's a good idea to gut the public sector union workers so that the rich can have their tax breaks and Goldman Sachs can have its money? I for one would encourage the unions to strike, for the Greek government to default on its debt, and for whoever is in a position to do so, to let Goldman, JP Morgan, and the others eat the hot steaming pile of shit sandwich they've been serving up to the rest of us.

Maybe the point of all of this is to topple the Euro and force all of Europe's banks into the same position as the U.S. banks. The word is, that the European banks are in far worse shape, if it's possible to imagine, than the U.S. banks.

Collectability may be an issue for Goldman. They are hardly naive, and surely knew that any minister or other Greek official signing an agreement with them, would not have authority to commit Greece without appropriate disclosure to parliament, EU authorities, etc. If Goldman did not themselves take precautions to disclose to officials/public re the agreements, then they may have forfeited their ability to collect. Such a substantial loss for Goldman might be an appropriate reminder of risk not to engage in what appear dubious perhaps fraudulent transactions, as well as a restorative for Greek finances.

...ask yourself who knows how much has really been borrowed by various governments around the world?

Nope, and I don't know how to find out either.

Iceland, then Greece. Wait until they try to pull this crap in Italy. Oops, they'll run into a real leftist blowback.

Nice work financial elite. What are we known for in the world - Blackwater and Goldman Sachs, killers of a different kind, but killers none the less.

thanks

Companies get the unions they deserve.

"The picture painted in the Western financial press makes the unions the villain in this play."

As were the unions in the UK in the '50s and '60s and '70s, as the elites hate unions.

Missing from this finger pointing are the actions of management that made, and continues to make, the the Union members aggressive & disgruntled.

As I found out when I went to work for NatWest and was added to a project that was understaffed, and late. In a short series of management decision were working 40 hours/week plus working from Friday morning to Sunday evening continuously for up to 60 hours, or an addition 40-50 hours of overtime to get a project to meet its deadlines.

We all were counting our overtime, 40 hours extra pay per week. One week this was cut back to 8 hours in any 24 hour period, 16 hours for the weekend, and then we "accumulated" time of in lieu.

There was no timekeeping system to manage the “accumulated time”, and the next week we were told the "accumulated time” had to be take while the project was current, and the project was to end in two months.

Effectively we were to be working 30 or so hours per week all weekends for free.

At that point I started to question what had caused all the industrial strike in the UK, what management decisions had caused to workers first to form a union, second to become so angry, and third to keep the workers angry.

Greece should default and reschedule

Feb 15, 2010 13:12 EST
John Kemp Reuters

The drama unfolding in Athens contains all the usual ingredients for a modern crisis. Poorly disclosed derivative transactions. Inadequate accounting for off-balance sheet liabilities. Investment banks eager to structure complex transactions in return for fat fees. And a furtive but gullible government that thought it could get something for nothing.

Life is a lottery; some loans go wrong in the ordinary course of events. But behind every really bad loan or class of loans, like subprime mortgages, there are greedy and foolish bankers and equally culpable borrowers. Greece is no exception.

The Greek state has only itself to blame for manipulating accounting rules and derivatives markets to run up unsustainable debts. But the banks that structured those transactions are hardly blameless and cannot really complain if they do not get all their money back.

One part of the problem is the use of swap transactions to provide upfront payments to the Greek state in return for deferred payments, ensuring Greece would scrape in under the Maastricht criteria for euro membership.

Swap transactions involve the exchange of one stream of payments for another. But these are confidential bilateral deals. The terms need not be actuarially fair or at current market prices.

In this instance, the terms of the swap transactions ensured that Greece was a net recipient of funds in the early years but would pay the money back later.

These were credits. But because they were structured as swap transactions rather than loans they did not have to be recorded as debt or count against the country’s compliance with the Maastricht criteria for eurozone membership, which was precisely why they were so attractive.

The swap transactions were perfectly legitimate. They were not the only cause of this crisis. But they have helped Greece accumulate more debt that would otherwise have been possible, pushing the country closer to the brink.

BAILING OUT THE BANKS, AGAIN

Most commentators have concentrated on the need for the EU to bail out Greece. But in reality any rescue would be another subsidy for excessive-risk taking by the country’s bankers and the institutions that have sold credit default swaps (CDS) on Greek debt.

Forcing the country into an austerity programme and arranging an emergency loan from other EU members or the IMF would ensure the bankers got their money back (again), but inflict years of misery on the country’s households and businesses.

If market discipline is ever to be re-established after the boom and bailouts of the last five years, it is imperative creditors face the real prospect of making losses if they extend large loans and fail to price the risk on them properly. The sellers of CDS insurance must face up to making real payouts in return for all the premiums they pocket.

Bailing out Greece would be wrong. Not because it would harm the eurozone’s credibility, but because it would reinforce the rampant moral hazard in financial markets. It would perpetuate the inequitable and politically unacceptable situation where structuring fees are retained by the banks as private profits while credit losses are socialised and passed onto taxpayers.

Greece would do everyone a favour by declaring a moratorium and forcing a rescheduling. The country faces years of misery in any case. The threat of being shut out of capital markets rings hollow. But by triggering losses on these derivative transactions and a credit events under the CDS it would help ensure a much more prudent approach in international banking markets.

Bailing out Greece so everyone can pretend the country can remain “current” on its loans when it patently cannot would simply deepen the moral-hazard crisis. If market discipline is ever to be re-established (something which everyone agrees is desirable) then at some point creditors must take a loss. Greece is a good place to start.

PURGING THE SYSTEM

The other slightly Alice-in-Wonderland aspect of this crisis is the long list of banks, countries and institutions demanding Greece undertake brutal budget cuts to honour the bankers’ loans and before any emergency assistance can be pledged.

These are the same banks, countries and institutions that urged pro-growth policies in response to the subprime and banking crisis to avoid a deflationary spiral and widespread default. It seems shock therapy is appropriate for Greek households (”pour encourager les autres”) but not U.S. homeowners or the banks themselves.

After bailing out American homeowners and the banks themselves in 2008-2009 with vast quantities of cheap money, fuelling moral hazard, governments and financial markets have suddenly discovered a new commitment to fiscal rectitude — mostly someone else’s rectitude.

Fiscal consolidation (the polite term for tax rises and spending cuts) is an essential part of Greece’s debt workout. But the trajectory is crucial. Greece is being asked to undertake rapid consolidation mostly for symbolic reasons to maintain the EU’s commitment to treaty-purity even though it will push the country into a deep downturn, slashing incomes and budget revenues.

But “liar loan” mortgages to subprime households are not much different to the debts Greece has run up. If rescheduling and a gradual workout is a desirable outcome in the United States and the rest of Europe, to share losses more widely, it is hard to see why similar restructuring should not be the optimal outcome in Greece.

In the rest of North America and Western Europe, exceptionally low interest rates and central bank programmes to buy mortgage-backed securities and other instruments have provided a disguised form of rescheduling (in favour of lenders and borrowers, at the expense of long-suffering savers and taxpayers).

In a similar vein, there is a strong case for Greece’s debts to be defaulted and rescheduled (at the cost to creditors and sellers of default swaps) in order to share the burden more equitably between banks (who have profited handsomely from their transactions) and the local economy

Greece - A bigger version of Chicago?

Does this scenario sound familiar? The names of the objects and instruments of theft are different but:

Not helping the bankers were revelations this week that previous Greek governments have entered into secret deals with Goldman Sachs and other investment banks that allowed the government to borrow quietly and evade EU regulations in doing so. The deals involved currency swap derivatives that under normal circumstances would consist of a swap of assets, not a loan. But Goldman Sachs structured these deals so that Greece was given an upfront foreign exchange deal priced way off market and favorably to Greece. The contract generated at least a billion dollars of instantaneous foreign exchange profit for Greece. A reverse foreign exchange contract was also done for a far maturity date, and this off-market contract created a huge loss down the road. The net effect of these two contracts was that Greece received a billion dollars, and paid this amount back with interest far into the future. As collateral for the deal, Greece pledged certain assets, such as all of its proceeds for the next 20 years from the government-run lottery.

A billion dollars. Check! Far maturity date. Check! Off-market contract. Check! Huge loss down the road. Check! Pledged certain assets. Check! All the proceeds for the next 20 years. Ooops, no, 75 years! Government-run lottery. Ooops, no again, government-run parking meters! Goldman Sachs. Check-mate!

The mayor of Chicago (Daley) recently "privatized" our parking meters for way less than they are worth. He deserves jail for theft of public property.