Just
What Is Mario Draghi Hiding?
ECB
Declines To Respond To Bloomberg FOIA Request On Greek-Goldman Swaps
14
June, 2012
Back
in February 2010, in the aftermath of the discovery that none other
than Goldman Sachs had facilitated for nearly a decade the masking
of the true magnitude of non-Maastricht conforming Greek debt,
Zero Hedge first
identified the
prospectus for a Goldman underwritten swap agreement securitization
titled Titlos PLC. We titled the analysis "Is
Titlos PLC The Downgrade Catalyst Trigger Which Will Destroy Greece?"
because for all intents and purposes it was: at that time a rating
agency downgrade of the country would lead to a chain of events which
would make billions in assets ineligible for ECB collateral, forcing
a massive margin call on the National Bank of Greece, which likely
would have precipitated a Greek default there and then.
In
retrospect, considering the two years of pain that Greece has already
suffered, this may have been the better option as the country would
have taken its bitter medicine, and become a second Iceland case
study by now, growing at a brisk pace, unencumbered by debt, free
from the clutches of the Euro, instead of having its economy collapse
by nearly 10% every year without any resolution in sight.
But
that is irrelevant for the time being: what is relevant is Titlos
itself, and what Bloomberg did
after we posted the analysis. It turns out that following in the
footsteps of Mark Pittman,Bloomberg
sued the ECB under
Freedom of Information rules requesting "access to two internal
papers drafted for the central bank’s six-member Executive
Board. They
show how Greece used swaps to hide its borrowings, according to a
March 3, 2010, note attached to the papers and obtained by Bloomberg
News. The
first document is entitled “The
impact on government deficit and debt from off-market swaps: the
Greek case.”
The second
reviews Titlos Plc, a securitization that allowed National Bank of
Greece SA, the country’s biggest lender, to exchange swaps on Greek
government debt for funding from the ECB, the
Executive Board said in the cover note. The ECB's response: "The
European Central Bank said it can’t release files showing how
Greece may have used derivatives to hide its borrowings because
disclosure could still inflame the crisis threatening the future of
the single currency."
Maybe.
But
what is far more likely is that the reason why the ECB, headed by
none other than former Goldmanite Mario Draghi, is desperate to keep
these documents secret is for another reason. A very
simple reason:
Mario Draghi - 2002-2005: Vice Chairman and Managing Director at Goldman Sachs International
In
other words, Draghi was a key executive at Goldman at precisely
the time when none other than Goldman Sachs was hired to create and
facilitate the active hiding of the true extent of the Greek debt
problem.
In yet other
words: could it be that none
other than the head of the European Central Bank is refusing to
cooperate with a Bloomberg FOIA, something even the US Federal
Reserve ultimately succumbed to which
led the revelation that the Fed had handed
out trillions in
secret loans to banks all around the world - and
that includes tens
of billions in under the table loans to JPM, contrary to Dimon's
defense that he did not need the TARP money in Senate yesterday: he
did, and much more, but since when is perjury a crime before a
kangaroo court of bought politicians:
But
this is not about JPM for once. Let's go back to that infernal
mollusc which everyone loved to hate in all of 2009 and 2010 until JP
Morgan became the world's Fed-backstopped, prop trading pinata, and
the response that the ECB did provide
to Bloomberg as
a reason for not handing out the required information:
Disclosing the files when Bloomberg News first sought them in 2010 would have “fueled negative perceptions about Greece’s ability to honor its debt,” ECB lawyer Marta Lopez Torres said at a hearing of the European Union’s General Court in Luxembourg today. “It’s the same now with Spain” which “isn’t able to borrow money,” she said. “Markets are reacting in very volatile ways. It’s affecting the euro economy.”
In
other words from Mutual Assured Destruction as a means to push
through policy propaganda, M.A.D. is now the only option for heads of
central banks from being exposed to the world as the very same people
who enabled the current financial collapse in the first place?
Now
we see...
More
from Bloomberg, which explains the reasoning for demanding access to
the two abovementioned docs:
These documents “played a role” in shaping policy and “highlighted there were issues” when the ECB undertook a review of its eligibility criteria for collateral in its funding operations, the ECB lawyer told the court.
The cornerstone of the ECB’s response to the crisis is to give banks as much money as they needed in return for collateral. In October 2010, the ECB changed the rules on the asset-backed securities it accepted and gave itself more discretionary power to reject collateral if necessary.
“The public has a right to know how EU authorities may have allowed Greece to hide its deficit, which helped trigger Europe’s sovereign debt crisis,” said Matthew Winkler, editor- in-chief of Bloomberg News. “Greater transparency results in more accountability, and we seek this information to understand how this debt debacle unfolded in an effort to avoid repeating it.”
The Greek government didn’t originally disclose the swaps, designed to help it comply with the deficit and debt rules it agreed to meet when it joined the euro in 2001. The swaps allowed the country to increase borrowings by 5.3 billion euros, Eurostat, the EU’s statistics agency, said in November 2010.
In April 2009 -- seven months before the Greek crisis erupted -- ECB officials spotted “a swap operation in unusual terms,” according to the March 2010 document.
And
back to Goldman, who in the 2001 onward period was the sole bank
provider of shady currency swap transactions:
In the largest derivative transaction disclosed so far, Greece borrowed 2.8 billion euros from Goldman Sachs Group Inc. in 2001 through a derivative that swapped dollar- and yen- denominated debt issued by the nation for euros using a historical exchange rate, a move that generated an implied reduction in total borrowings.
“The Greek authorities had never informed Eurostat about this complex issue, and no opinion on the accounting treatment had been requested,” Eurostat, the Luxembourg-based statistics agency, said in a statement. The watchdog had only “general” discussions with financial institutions over its debt and deficit guidelines when the swap was executed in 2001.
“It is possible that Goldman Sachs (GS) asked us for general clarifications,” Eurostat said, declining to elaborate further.
Spokesmen for Goldman Sachs in London couldn’t immediately comment after the hearing.
How
about asking that other Goldman Sachs spokesman, Mario Dragi?
Perhaps
at the next ECB press conference journalists can finally grow a pair
and start asking the really important questions instead of listening
to the violins as the European titanic is steadily sinking?
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