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Feds Probe Goldman Sachs Over Greece

There is other news going on in the world.

From an outraged Associated Press:

Fed to look into insurance contracts on Greek debt

By Jeannine Aversa, AP Economics Writer

February 25, 2010

WASHINGTON – Federal Reserve Chairman Ben Bernanke told lawmakers Thursday that the central bank is looking into the use by Goldman Sachs and other Wall Street firms of a sophisticated investment instrument to make bets that Greece will default on its debt.

Bernanke said the Fed is looking into companies’ use of credit default swaps, a form of insurance against bond defaults. Bernanke made the comments at the start of a Senate Banking Committee hearing, the second day where the Fed chief testified on Capitol Hill about the state of the economy.

"Obviously, using these instruments in a way that intentionally destabilizes a company or a country is counterproductive, " Bernanke said, adding that the Securities and Exchange Commission probably will be looking into this matter as well.

"We’ll certainly be evaluating what we can learn from the activities of the holding companies that we supervise here in the U.S," Bernanke said.

The panel’s chairman, Sen. Christopher Dodd, D-Conn., said he is troubled that this practice could worsen Greece’s debt crisis.

"We have a situation in which major financial institutions are amplifying a public crisis for what would appear to be for private gain," Dodd said.

Dodd wondered whether there ought to be limits on the use of credit default swaps to prevent "the intentional creation of runs against governments."

Luckily, Chris Dodd is on the job.

He will get to the bottom of any untoward financial shenanigans.

(Thanks to Confucius for the heads up.)

This article was posted by Steve on Thursday, February 25th, 2010. Comments are currently closed.

4 Responses to “Feds Probe Goldman Sachs Over Greece”

  1. Confucius says:

    From the Associated Press:

    Fed to look into insurance contracts on Greek debt

    By Jeannine Aversa

    WASHINGTON – Federal Reserve Chairman Ben Bernanke told lawmakers Thursday that the central bank is looking into Goldman Sachs and other Wall Street firms’ use of a sophisticated investment instrument to make bets that Greece will default on its debt.

    Bernanke said the Fed is looking into companies’ use of credit default swaps, a form of insurance against bond defaults. …

    “Obviously, using these instruments in a way that intentionally destabilizes a company or a country is counterproductive, ” Bernanke said, adding that the Securities and Exchange Commission probably will be looking into this matter as well. …

    The panel’s chairman, Sen. Christopher Dodd, D-Conn., said he is troubled that this practice could worsen Greece’s debt crisis.

    “We have a situation in which major financial institutions are amplifying a public crisis for what would appear to be for private gain,” Dodd said. …

    http://news.yahoo.com/s/ap/20100225/ap_on_bi_ge/us_bernanke

    Credit default swaps belong to a class of engineered financial instruments known as derivatives. They are used to speculate or hedge on an entity’s solvency. More simply put, they are a method for making money on someone else’s failure.

    These credit default swaps contributed to the avalanche that buried AIG, Bear Stearns, Lehman Brothers and eventually the entire U.S. economy in 2008.

    Warren Buffett characterized derivatives as “financial weapons of mass destruction.”

    So first the U.S. and now Greece. What is it with Goldman Sachs and the rest of Wall Street?

  2. Confucius says:

    Credit default swaps belong to a class of engineered financial instruments known as derivatives. They are used to speculate or hedge on an entity’s solvency. More simply put, they are a method for making money on someone else’s failure.

    These credit default swaps contributed to the avalanche that buried AIG, Bear Stearns, Lehman Brothers and eventually the entire U.S. economy in 2008.

    Warren Buffett characterized derivatives as “financial weapons of mass destruction.”

    So first the U.S. and now Greece. What is it with Goldman Sachs and the rest of Wall Street?

  3. proreason says:

    Goldman Sachs?

    The company that has made billions in every financial crisis since the early 1900’s?

    Who would have thought they might be involved in the pending meltdown of Greece?

    George Soros is going to have to give them a stern lecture in responsible investing.

    And isn’t it wonderful that Chris Dodd has discovered the danger of financial shell games derivatives, now that the world economy is teetering on the brink from the financial shell games derivatives that Mr. Dodd forced upon the financial industry to hide the impending catastrophe smooth the risk that idiot Democrats legislators foisted on the USA created with their Fannie Mae Loans-to-Deadbeats criminal enterprise program.

  4. GetBackJack says:

    Contrary to popular conservative opinion, occasionally a shameless partisan foolish knuckleheaded media rag like Rolling Stone gets one right. (try to get past the author byline)

    This is the one –

    http://www.rollingstone.com/politics/story/28816321/inside_the_great_american_bubble_machine/print


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