GOLDMAN Sachs is among Wall Street banks being investigated for helping Greece mask its alarming financial woes, US Federal Reserve boss Ben Bernanke revealed yesterday.
Bernanke said the Fed and the US Securities and Exchange Commission were “interested” in complex derivative deals arranged by the big banks for the previous Greek government.
Goldman Sachs is already being looked at by the European Union for a currency swap dating to 2001 that apparently allowed Greece to hide the bloating of its public deficit and national borrowing.
Speaking to a Congressional committee, Bernanke said: “Using these instruments in a way that potentially destabilises a company or country is counterproductive... We are looking into a number of questions.”
Earlier this week, Goldman Sachs co-chairman Gerald Corrigan insisted the structures put in place for Greece were “consistent” with regulations at the time. Other banks being examined are thought to include Morgan Stanley and JPMorgan.
US Chamber of Commerce chief economist Martin Regalia told City A.M. the outcome of the process was difficult to predict, but added: “The public and Congress aren’t prepared to see another scandal. If it comes out [certain banks] stepped over the line, you’re going to see Congress go berserk over this.”
The US authorities will particularly scrutinise Goldman’s sale of $15bn (£9.8bn) of Greek gilts nine years ago after a loan-turned-currency swap.
The transaction, described as “just an ordinary swap” by then finance minister Yannos Papantoniou, did not legally have to be disclosed but allowed Athens to disguise the extent of its budget shortfall at a point when it had just joined the euro.
The news could hardly come at a worse time for Greece, which will need to refinance more than €8bn (£7.1bn) of debt in April and May.