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Goldman Sachs and Greek Debt Crisis

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Goldman Sachs and Greek Debt Crisis

  1. 1. Greece Debt Crisis<br />
  2. 2. Part 1: What trouble was<br />Greece in?<br />
  3. 3. Eurozone <br />Since 1999<br />How can I join it?<br />Greece<br />
  4. 4. Part 1 Summary<br />
  5. 5. Jan 1, 2001<br />reece finally joined the Euro<br />Zone, becoming the 12th country <br />to join the European single currency.<br />G<br />
  6. 6. Nov 15, 2004<br />Greece admitted fudging Euro Zone entry<br />EU Standards: <br />Deficit < 3% GDP<br />Debt rate < 60%<br />What about real figures in Greece?<br />
  7. 7. Large Deficits<br />Greek economy’s remarkable feature<br /><ul><li>Borrow to finance public sector and social welfare since 1974
  8. 8. Debt to GDP has remained above 100% since 1993</li></li></ul><li>Goldman Sachs offered to help Greece<br /><ul><li>Cosmetic surgery that beautifies Greece’s finance statements
  9. 9. Secretive deal claimed to be “low-risky”</li></li></ul><li>OUT OF COUNTROL<br /><ul><li>Financial crisis hit Greek economy hard
  10. 10. Misreporting is revealed to the public
  11. 11. Credit ranking downgrading to “junk” level</li></ul>Greece is in big trouble!<br />
  12. 12. Feb 11, 2010<br />Goldman Sachs faced federal inquiry over Greek Crisis<br />What really happened?<br />
  13. 13. Part 2: the currency swap<br />
  14. 14. The Deal <br />Issues 10 billion <br />dollars of bonds<br />Swap into 8.4 billion<br />Euros of bonds<br />The Greek Government<br />
  15. 15. Currency Swap<br />2011<br />$1 more billion<br />
  16. 16. Benefits of the transaction<br />NOT in the balance sheet<br />NOT required to report to EU<br />
  17. 17. Part 2 Summary<br />
  18. 18. Bonds<br />$10bn<br />Market<br />€ 7.4bn<br />€8.4bn<br />$10bn<br />Goldman Sachs<br />
  19. 19. Currency Swap<br />Lending Transaction<br />Need to Report<br />Currency Transaction<br />No one Cares<br />
  20. 20. Part 3: CDS<br />Goldman Sachs<br />Credit Default Swap: CDS<br />
  21. 21. The loan if default<br />Risk<br />Loan<br />Premium<br />
  22. 22. CDS: no regulation<br />NOT transparent<br />1<br />NOT traded on any exchange<br />2<br />NOT subject to securitiylaws<br />3<br />
  23. 23. Consequence<br />Greek Government Defaults<br />A large compensation<br />Greek Government does not default<br />Appreciation of CDS<br />
  24. 24. Part 3 Summary<br />
  25. 25. Competitors<br />German bank<br />CDS<br />sell<br />
  26. 26. When Greece is said to “collapse”<br />German bank<br />Seller of CDS <br />LOSER…<br />Owner of CDS<br />WINNER!!!<br />

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