The holes in Goldman's Greek defence - Goldman's AIG defense?

[WhiskeyGirl]

Goldman Sachs' statement on its financial deals with Greece, which made the debt of this financially stretched nation seem smaller than it actually was, will not - I think - silence the many critics of the world's most successful investment bank.

In a series of deals, Goldman did two things for Greece.

During December 2000 and January 2001, it "swapped" some of Greece's Yen and Dollar debts into euros, using a "historical implied foreign exchange" rate rather than the market rate. In other words, it used invented exchange rates, rather than market rates, whose effect was to make it seem that Greece's liabilities in its own currency were less than was actually the case.

read more here - http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/02/the_holes_in_goldmans_greek_de.html

How did AIG manage all those CDO's with AIG?  Anyone (outside AIG/Goldman/Federal Reserve/Treasury) really take a good look at all those contracts?  Fresh eyes without conflicting interests?

Goldman's Greek defence carries the following momentous implication (albeit one that many will say is blindingly obvious): Goldman is in effect saying that banks will always go for the seemingly profitable deal, unless they are formally prohibited from doing so; and that it's naive to expect them to do the "right thing", in a nebulous ethical sense, unless they are obliged to do that right thing.

Which may reinforce the case of those - like the US president - who argue that the only safe bank is one that is subject to the tightest possible constraints on what it can do and has been cut down to a safe size.

What happened to fiduciary responsibility?  Did government dealmakers have to pay all those counterparties at 100%?  Were they acting in the best interest of taxpayers?

more here - http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/02/the_holes_in_goldmans_greek_de.html

I think the EU has the advantage of fresh eyes that do not have potential conflicts of interest with Goldman alumni.