By Simon Johnson
He hits hard to the core of the issue:
“Financial assistance for countries that violated the terms of their participation in EMU [European Monetary Union, i.e., the eurozone] would be a major blow for the credibility of the whole framework.”
- Goldman, we know now, was intimately involved in the deal(s) that allowed Greece to violate the terms of its participation in EMU. It is possible – but not yet confirmed – that the entire nefarious swap arrangement in 2001 was Goldman’s idea. This would be beyond being the equivalent of helping people dodge their taxes; this is actively encouraging your clients to undermine the basis of civilized society. Following Mr. Issing’s logic, which seems sound, Goldman played a major role in undermining the eurozone.
- Goldman is currently presumed to have a stake in Greek government securities, given its recent and ongoing relationships with that country. It looks very much like Mr. Issing may be talking Goldman’s book, whether he realizes it or not.
- Presumably Mr. Issing will be able to reassure someone that there was nothing improper about his article today. But who exactly has jurisdictions over such issues – for a US bank holding company operating in another country? Is this a matter for the Securities and Exchange Commission in Washington or the European Commission in Brussels or the German government or someone else? Where is the Federal Reserve – Goldman’s primary supervisor – on such issues, which pertain to global financial instability? Welcome to the scary and essentially unsupervised world of international banking.
Mr. Issing and Goldman Sachs will no doubt soon issue a detailed explanation regarding his exact involvement in and knowledge of all transactions and positions related to Greece.
Hopefully, the Financial Times, Bloomberg, and other news organizations will amend their coverage to reflect Mr. Issing’s affiliations – and also ask more pointed questions about potential conflicts of interest in the future.
The scope, reach, and influence of Goldman Sachs today are unprecedented. Thinking in terms of the broader global economy – and our own struggling recovery – is this a good thing?
At the very least, we need a great deal more transparency and disclosure regarding everything said or done by anyone linked to Goldman in any fashion.