Greece: The way

Marshall Auerback has written what I consider the best single piece on the Greek disaster, which is really a carry-over from the American disaster (which is having disastrous consequences: See the chart at left). A few excerpts:

Maybe Greece should secede from the European Union and default on its euro debt? Or go hat-in-hand to the International Monetary Fund (IMF) to beg for loans while promising to clean up its act? Or to the stronger Euro nations, hoping for charitable acts of forgiveness? Unfortunately, all of these options are going to mean a lot of pain and suffering for an economy that is already sinking rapidly.

Here’s a more appropriate action: declare war on Goldman Sachs and other global financial firms that created this mess. Send the troops, the planes, the tanks, and the ships. Attack every outpost of the saboteurs on European soil. Blockade the airports and ports. Make Wall Street traders and CEOs fear for their lives, or at least for their freedom to travel. Build some Guantanamo-like facility to hold these enemy financial combatants until they can be tried, convicted, and properly punished.

Ok, if a literal armed attack on Goldman is too far-fetched, then go after the firm using the full force of the regulatory and legal systems. Close the offices and go through the files with a fine-tooth comb. Issue subpoenas to all non-clerical staff for court appearances. Make the internal emails public. Post the names of all managers and traders on Interpol. Arrest anyone who tries to board a plane, train, or boat; confiscate their passports; revoke their visas and work permits; and put a hold on their bank accounts until culpability can be assessed. Make life at least as miserable for them as it now is for Europe’s tens of millions of unemployed workers.

Lest anyone believe that Goldman’s executives were somehow unaware of bad deals done by rogue traders, William Cohan (http://opinionator.blogs.nytimes.com/2010/02/18/the-great-goldman-sachs-fire-sale -of-2008) reports that top management unloaded their Goldman stocks in March 2008 when Bear crashed, and again when Lehman collapsed in September 2008. Why? Quite simple: they knew the firm was full of toxic waste that it would not be able to continue to unload on suckers—and the only protection it had came from AIG, which it knew to be a bad counterparty.

From 2001 through November 2009 (note the date—a full year after Lehman) Goldman created financial instruments to hide European government debt, for example through currency trades or by pushing debt into the future. But not only did Goldman and other financial firms help and encourage Greece to take on more debt, they also brokered credit default swaps on Greece’s debt—making income on bets that Greece would default.

Of course, as far as Greece goes, the claim now is that these types of off balance sheet transactions in which Goldman and others engaged were not strictly “illegal” under EU law. But these are precisely the kinds of “shadow banking transactions” that almost brought down the global financial system 18 months ago. Literally a year after the Lehman bankruptcy – MONTHS after Goldman itself was saved from total ruin, it was again engaging in these kinds of deals.

And it wasn’t exactly a low-level functionary or “rogue trader” who was carrying out these transactions on behalf of Goldman. Gary Cohn is Lloyd “We’re doing God’s work” Blankfein’s number 2 man. So it’s hard to believe that St. Lloyd did not sanction the activities as well in advance of collecting his “modest” $9m bonus for last year’s work.

Greece, Euroland in general, and the rest of the world all need a holiday from the manipulation and destruction of our economies by Wall Street firms that profit from speculative bubbles, from burying firms, households, and governments under mountains and debt, and even from the crises that they create. Governments all over the globe should use all legal means at their disposal to ferret out the bad faith and even fraudulent deals that global financial behemoths are foisting on us.

Yes, I've quoted far too much. This is not a quote blog, most of the time. But this article strikes me as particularly important, and I encourage you to read the whole thing.

For me, the bottom line comes down to this: Obama won't clamp down on Goldman because Goldman has so thoroughly infiltrated this administration that it is hard to determine where one ends and the other begins. But why haven't any European politicians had the courage to name the enemy and to engage him on the field of battle?