February 16th, 2012
by Guest Author, ECB Watch
Editor's note: This is breaking news presented with interspersed editorial comment.
From the report on the Council recommendation for appointment of Mario Draghi (pictured) to be the President of the European Central Bank (rapporteur: Sharon Bowles):
4. Do you have any business or financial holdings or any other commitments which might conflict you with your prospective duties, and are there any other relevant personal or other factors that need to be taken account of by the Parliament when considering your nomination?
[M. Graghi:] No.
4. Conflict of interests4.1. The members of the Governing Council shall avoid any situation liable to give rise to a conflict of interests. A conflict of interests arises where the members of the Governing Council have private or personal interests, which may influence orappear to influence the impartial and objective performance of their duties. Private or personal interests of the members of the Governing Council mean any potential advantage for themselves, their families, their other relatives or their circle of friends and acquaintances.
According to Nouvel Observateur, ECB has said that Draghi
scrupulously abides by the code of conduct.
Let's recap our understanding of the falsification of Greek debt. Goldman Sachs, who arranged the infamous Greek currency swaps in 2001, had used the pretense of external validation of Greece's books as evidence there were doing nothing illegal in parliamentary hearings in 2010 (UK/EU). But according to extensive Eurostat audits that were made public in November 2010, there has been a pattern of deceptive, willful, irregularities in Greece's national accounts reporting, throughout the decade. That's a major contradiction.
A crucial fact, a major restructuring of the deal in 2005, has gone under the radar completely. That's a very odd oversight. To this day, the prevailing thought is that the deal was done in 2001, regrettably, but what can you do?! Well, what a government does, in a society that upholds the rule of law is appoint a prosecutor to seriously investigate this kind of problem. The falsification is, presumably, a serious offense, but, in addition, Goldman Sachs shorted Greek debt. On the face of it, this falls within the broad category of violations called a market abuse. The FSA and the EU have specific directives against that (for the EU,2003/6/EC). Who was in charge, or rather was supposed to be in charge? We will find out. What is willful or gross negligence? In 2010, according to the Business Standard:
UK Prime Minister Gordon Brown said he wanted the Financial Services Authority to open an inquiry, declaring he was “shocked” at the “moral bankruptcy” indicated in the suit. The German financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.Goldman's other line of defense (repeated at nauseum) during these hearings, is that their deal with Greece was commonplace. It wouldn't have made it right (only embarrassing in the capitals of Europe, an effective weapon), and, in any case, IBTimes recently reported that it is false:
Eurostat, which provides the EU with statistics on member states, told IBTimes UK that there were "only a very few off-market swaps for small amounts" in a "limited number of EU member states" including Italy, Germany, Poland and Belgium...There were concerns that other countries may have done similar large deals to that between banking giant Goldman Sachs and troubled Greece a decade ago, using pretend exhange rates, effectively disguising the true scale of their debts.
There was mention of an investigation by the Fed in 2010. Does anyone know what the status of that is?
Sources and References:
- EU Ignores Falsification of Greek Public Finance Data (ECB Watch, GEI Analysis, 18 December 2011)
- "Mario Draghi Nomination Based on Deception (ECB Watch, GEI Analysis, 27 December 2011)
- Stiglitz: ECB is the Agent for a Few Powerful Banks (ECB Watch, GEI Opinion, 15 February 2012)
Extensive reference bibliographies accompany the above articles.