The Greek debt crisis offers another
illustration of Wall Street’s powers of persuasion and predation, although the
Street is missing from most accounts.
The crisis was exacerbated years ago
by a deal with Goldman Sachs, engineered by Goldman’s current CEO, Lloyd
Blankfein and his Goldman team helped Greece hide the true extent of
its debt, and in the process almost doubled it. And just as with the American
subprime crisis, and the current plight of many American cities, Wall Street’s
predatory lending played an important although little-recognized role.
In 2001, Greece was looking for ways
to disguise its mounting financial troubles. The Maastricht Treaty required all
eurozone member states to show improvement in their public finances, but Greece
was heading in the wrong direction.
Then Goldman Sachs came to the rescue,
arranging a secret loan of 2.8 billion euros for Greece, disguised as an
off-the-books “cross-currency swap”—a complicated transaction in which Greece’s
foreign-currency debt was converted into a domestic-currency obligation using a
fictitious market exchange rate.
As a result, about 2 percent of Greece’s
debt magically disappeared from its national accounts. Christoforos Sardelis,
then head of Greece’s Public Debt Management Agency, later described the deal
to Bloomberg Business as “a very sexy story between