Is Greece the New AIG?
With the mounting crisis in Greece, another massive stash of toxic debt has revealed itself in a way that can't be ignored. Fears of a "contagious default" in the Eurozone hammered markets yesterday, with one Greek banker calling it a "wholesale selling off of the country." Today, markets are rebounding on hopes for an EU bailout, and around we go again. Though parallels to Dubai are obvious, Zero Hedge has noted the similarities between Greece and AIG due to the intimate involvement of Goldman Sachs in both crises. Rumor has it that Goldman was a "bulk buyer" of Greek protection, ZH writes, and that thus "it is precisely Goldman, just like in the AIG case,that can now dictate what the collateral margin that Greek counterparties, and by extension the very nation of Greece, have to post on billions of dollars of Greek insurance." This is the kind of enormous leverage that helped Goldman take AIG to the cleaners at taxpayers' expense. Zero Hedge's allegations are backed up by rumors, for the most part. But there is no denying that Goldman is mixed up in Greece, between this piece from Spiegel and this recent Financial Times article on Goldman's prominent role in the Greece "rescue." If the allegations are true, Goldman is once again negotiating for a giant pass-through of taxpayer money from a world superpower. There are also signs that the bank is (once again) joined by a network of hedge fund colluders in its efforts. The FT article on Goldman in Greece led with the curious news that the bank was "shepherding" a client around Athens:
A team from Goldman Sachs was in Athens on Thursday shepherding representatives of Paulson, the US hedge fund, around meetings with local bankers, economists and analysts. The client visit, the second to Athens this month arranged by the US investment bank, highlights a deepening involvement with Greece's socialist government as it desperately tries to shore up the public finances and avoid default - and comes after the Financial Times reported this week that the bank was mooting a controversial debt deal with China.Paulson's presence in Greece should raise eyebrows. The hedge fund, like Goldman, won big by betting against the subprime meltdown. Speculators are currently attacking Greek financial markets, to the point where Stiglitz is telling the Greek government to call their bluff. Is Paulson one of them?
Indeed, an article in the Greek daily To Vima (original here) several weeks ago suggests that Paulson & Co is in Greece for more than a "client visit." The article, titled "The Speculator who 'plays' with Greece," reports that John Paulson is "orchestrating the pressure on Greek government bonds and the Euro." This has not been reported in the English-language press (from what I can tell), though it would seem to be very newsworthy if true. The article also reports, via Google Translate, that Paulson "allegedly decided to deal systematically with Greece (via the hedge fund Paulson & Company which he founded and runs) betting on degradation of the reliability of our country and the climate of concern for our financial terms." The hedge fund has a team of 20-30 traders focused on this Greek strategy. That John Paulson and Goldman appear to share the same vulture flight pattern, once again, in Greece, is incredibly suspicious. Are they colluding in a repeat of their winning subprime trade? Is the European Union their next taxpayer-funded counterparty? Is Greece the next AIG? Time will tell.
Hedge fund king John Paulson: partnering with Goldman in Greece?