Those Greek Swaps
Heidi Moore has a great write-up of the Goldman-Greece swap story. Do read it. But don’t let her convince you that there’s nothing in this story to lend credible ammunition to the squid-eating Matt Taibbis of the world. Moore lets Goldman and the rest of the banks off too easy.
But the swaps weren’t illegal, and Goldman was giving its client — Greece — what it asked for. The bank followed all the rules to do it. True, the swaps weren’t disclosed, but you can blame the Maastricht rules for that: No country has to disclose these swaps, and that’s partly why they’re so popular with politicians and also why you never hear about them in the popular media.
Since when is “following the rules” the standard of ethics against which we’re to judge bankers? All manner of regulatory arbitrage schemes concocted and pitched by bankers were (and in many cases still are) legal, but that does not absolve them of blame. And that’s exactly what these swaps are: an arbitrage of disclosure. Greece borrowed money from Goldman in a clever manner that skirted the rules about disclosure. Just like banks used structured credit products to create high-yield (i.e. risky) investments that were complicated enough that they could dupe rating agencies and regulators into thinking they were safe.
These schemes share a common thread: they facilitated risk-taking by obfuscating it. Yes, we should blame the gamekeepers for designing too-flimsy rules or for poorly enforcing them. But we should also blame the poachers for finding and profiting from the gaps in those rules.
