Goldman Sachs: The Evil Empire?

I’m sure by now we have all heard the news from Greece, how Goldman helped mask Greek debt through a derivative currency swap. Greece needed to get its high debt ratio down in order to be accepted into the European Union. So in 2001 Goldman Sachs and the Greek Public Debt Division agreed to a cross currency swap linked to Greece’s outstanding yen and dollar debt. Now almost a decade later it seems Goldman Sachs is under the microscope for seemingly unethical practices, taking advantage of a vulnerable government.

I think it’s important to see this story through the eyes of Goldman. The fact is an opportunity arose, a $300 million dollar opportunity to be exact, to write up a completely legal agreement. At this point the responsibility of whether or not this agreement will really fix the problem or just mask it falls onto the government.

At the time of the agreement Greece wanted to be admitted into the European Union, but did not have the balance sheet to oblige. So, instead of dealing with it by raising taxes or cutting spending and waiting 2 or 3 years, they opt for the quick fix. This seems to talk about politician’s tendencies to pass problems on to the future administration. What banker would turn down a $300 million contract? Perhaps, we need to stop blaming fee run companies like
Goldman and put some responsibilities on the clients.

Wall Street and Goldman Sachs in specific did not create Greece’s debt issues, granted they did allow Greece to borrow beyond its means in a perfectly legal agreement. Greece wanted to be part of the Union and Goldman made that possible, so whose fault is the Greek crisis. Just remember there’s always two sides to every story.