Global leaders are bearing down on Goldman Sachs, demanding to know whether the firm helped cover up Greece’s cash crisis in order to peddle $15 billion in government IOU’s to unsuspecting investors.
Outrage swelled yesterday following new reports that Wall Street’s most profitable bank concocted financial transactions in 2001 that allowed Greece to sweep its debt troubles under the rug, making its bonds seem like safe bets. At the same time, Goldman was selling $15 billion of Greece’s government bonds and IOUs to clients without disclosing Athens’ deficit, according to reports.
German Chancellor Angela Merkel said it would be a “scandal” if the banks that brought the world to its financial knees had also helped Greece “falsify its budget.”
A second day of protests erupted on the streets of Athens and another bomb explosion occurred, this one outside a police building, causing damage but no injuries. Rallies and wildcat strikes continued to disrupt government services.
None of it softened Greece’s vow to solve its debt crisis with freezes of public-servant payrolls, layoffs and other cost cuts.
Meanwhile, EuroStat, which tracks EU regulatory documents, demanded that Greece turn over all files related to the financial transactions by Goldman and other banks. The probe was expected to spread to other EU countries that may have made similar deals.
Bloomberg News, citing documents it reviewed, yesterday said that in at least six of the 10 bond deals Goldman handled for Greece, no mention was made of the so-called future swap transactions that moved as much as $10 billion of debt off Greece’s public books.
The omission apparently allowed Goldman, a co-lead manager on many of the sales, to get better proceeds from the investment public, said fund manager Bill Blain of Matrix Corporate Capital.
“The price of bonds should reflect the reality of Greece’s finances,” Blain told Bloomberg. “If a bank was selling them to investors on the basis of publicly available information, and they were aware that information was incorrect, then investors have been fooled.”
Goldman Sachs had no immediate comment. paul.tharp@nypost.com