Goldman Sachs Facts

A cynic would point out that both the new Greek and Italian leaders are Goldman Sachs insiders. As is the new European Central Bank president, Mario Draghi. Press Europe has the details:

Draghi was Goldman Sachs International’s vice-chairman for Europe between 2002 and 2005, a position that put him in charge of the “companies and sovereign” department, which shortly before his arrival, helped Greece to disguise the real nature of its books with a swap on its sovereign debt.

Monti was an international adviser to Goldman Sachs from 2005 until his nomination to lead the Italian government. According to the bank, his mission was to provide advice “on European business and major public policy initiatives worldwide”. As such, he was a “door opener” with a brief to defend Goldman’s interest in the corridors of power in Europe.

The third man, Lucas Papademos, was the governor of the Greek central bank from 1994 to 2002. In this capacity, he played a role that has yet to be elucidated in the operation to mask debt on his country’s books, perpetrated with assistance from Goldman Sachs. And perhaps more importantly, the current chairman of Greece’s Public Debt Management Agency, Petros Christodoulos, also worked as a trader for the bank in London.

But why does Goldman Sachs’ influence matter? Remember, in 2008, Treasury Secretary Hank Paulson, also from Goldman Sachs, just about staged a coup to bail out US banks. He had to threaten politicians with the notion that their salaries wouldn’t be paid if the financial system ceased to exist. That got them moving. Transcripts of the many phone calls Paulson made to Goldman Sachs’ CEO at the time would make for interesting reading. All we know is that there were a lot of calls between the two during the crisis.

So the Goldman boys have rigged the deck in their favour in Europe too. Bankers have positioned themselves to pull off another bank rescue. But it doesn’t always work out well for them. Goldman Sachs CEO alumnus, Jon Corzine managed to run the enormous brokerage firm MF Global into the ground on European sovereign debt recently. The bankruptcy has hit several of his Goldman buddies too. Not to mention many Aussie investors.

Nick Hubble,
for Markets and Money

Nick Hubble
Nick Hubble is a feature editor of Markets and Money and editor of The Money for Life Letter. Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like. He then brought his youthful enthusiasm and energy to Port Phillip Publishing, where, instead of telling everyone about Markets and Money, he started writing for it. To follow Nick's financial world view more closely you can you can subscribe to Markets and Money for free here. If you’re already a Markets and Money subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Markets and Money emails.

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