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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (41097)	2/10/2010 4:00:30 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 71588

Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt By Beat Balzli 02/08/2010 06:55 PM Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit. Greeks aren't very welcome in the Rue Alphones Weicker in Luxembourg. It's home to Eurostat, the European Union's statistical office. The number crunchers there are deeply annoyed with Athens. Investigative reports state that important data "cannot be confirmed" or has been requested but "not received." Creative accounting took priority when it came to totting up government debt. Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn't exceed 60 percent. The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent. Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products. Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date. Fictional Exchange Rates Such transactions are part of normal government refinancing. Europe's governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations. But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks. This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer. In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent. At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005. The bank declined to comment on the controversial deal. The Greek Finance Ministry did not respond to a written request for comment. URL: spiegel.de

To: Peter Dierks who wrote (41097)	2/14/2010 7:10:10 PM
From: Peter Dierks	1 Recommendation Respond to of 71588

Blame-Bush Tack Is Wearing Thin FEBRUARY 12, 2010, 9:49 P.M. ET. By GREG HITT And NAFTALI BENDAVID WASHINGTON—Democrats are working hard these days to tell voters that the nation's economic problems were created by President George W. Bush. But that line of attack—which has buoyed the party significantly over the past four years—may be losing its edge. In a string of recent elections, Democrats have tried to paint Republicans as Bush acolytes ready to lead a revival of his policies. One widely aired television ad in the recent Massachusetts Senate race showed a picture of Republican Scott Brown, and then shots of former President Bush and Vice President Dick Cheney. Mr. Brown won anyway. The results suggest voters are beginning to worry less about what Mr. Bush did, and more about what President Barack Obama will do to dig the economy out. Indeed, most polls suggest there is little debate about which president should be blamed. In the most recent Wall Street Journal/NBC News survey, 65% of voters agreed Mr. Obama had inherited the nation's economic problems. But by a 49% to 43% margin, voters also said they disapprove of Mr. Obama's handling of the economy, underscoring how they have shifted responsibility for the issue to the Democratic president. The changing dynamics could deny Democrats a powerful message in this year's midterm elections and lighten a yoke that has weighed on Republicans since they lost control of Congress in 2006. Some Democrats are beginning to acknowledge that invoking the Bush name might not be effective anymore. It has "lost any relevancy and therefore any potency," said Paul Begala, a longtime adviser to former President Bill Clinton. Sen. Robert Menendez (D., N.J.), who is running Democrats' re-election efforts in the Senate, said the party instead wants to focus on Mr. Bush's record, if not his name. "I don't think this is about using George Bush as a bogeyman, but about Republicans owning up to their embrace of the economic policies that got us in this mess in the first place," he said. Republicans, for their part, are saying it is time to move on. "The American people aren't waking up in the morning and blaming George Bush," said Virginia Rep. Eric Cantor, the House Republican whip. Eric Fehrnstrom, a senior adviser to newly elected Sen. Scott Brown, noted that Democrats tried to paint the Massachusetts Republican as a Bush wannabee, to little effect. "The Democrats need a new playbook," he said. Leveraging a president's unpopularity to political advantage is a well-established strategy. For decades after the Great Depression, Democrats deployed the image of Herbert Hoover while portraying themselves as guardians of working people. Ronald Reagan often invoked the economic record of Jimmy Carter on his way to a landslide re-election in 1984. More recently, Democrats won over voters by criticizing Republican candidates for signing on to Mr. Bush's policies. The message helped fuel Democratic wins in 2006 and 2008, and in a couple of special elections last year for House seats. The same tactics were deployed in January against Mr. Brown. Stumping in Boston before the vote, President Obama argued "what's at stake here" is "whether we're going forward, or going backward." Mr. Obama and his Democratic allies have also begun highlighting Republican proposals that revisit pieces of the Bush agenda, such as a plan by Rep. Paul Ryan (R., Wis.) to allow younger Americans to invest some of their Social Security payroll taxes in the private market. Democratic strategists are still urging candidates around the country to define the election year as a debate over Bush-era policies. A memo recently distributed by Mr. Menendez's Democratic Senatorial Campaign Committee instructed: "It is incumbent upon your campaign to build the case that electing your opponent will mean a return to an economic approach that nearly drove us off a cliff." In several battleground states, including New Hampshire and North Carolina, that has translated into Democrats seizing on Mr. Obama's proposal for a bank-bailout fee to draw distinctions with Republicans who oppose it. Republicans, by and large, are shrugging off the attacks. In Massachusetts, Mr. Brown opposed the bank fee, called for across-the-board tax cuts and still won. He also studiously rejected any effort to link him to the Republican establishment and especially to Mr. Bush. "As far as voters were concerned, it was like trying to tie him to Warren G. Harding," Mr. Fehrnstrom said. Write to Greg Hitt at greg.hitt@wsj.com and Naftali Bendavid at naftali.bendavid@wsj.com online.wsj.com