The Debt-Ceiling Disaster Flick, Hollywood-Style

During the last two weeks of July 2011, the American media was focused on the debt-ceiling negotiations. In the midst of a summer with plenty of natural distractions, an increasing number of Americans were cluing in to find their federal government at a stalemate as the clock ticked to a possible economic catastrophe said to begin on 12:01am on August 3, 2011. The U.S. Treasury department had estimated that it would run out of ways to make up for the lack of additional borrowing authority on August 2^nd.  To the media, that meant a clock ticking down to 12 midnight. In actuality, tax revenues were up so the actual date was said to be around August 10^th. In any case, the U.S. would not implode at precisely 12:01am on August 3^rd by any account, yet that made better drama, which in turn increased viewership.

The full essay is at "The Debt-Ceiling."

Amid Record Bonuses Goldman Sachs Enabled Greek Debt

The person who has the gold makes the rules.  I suspect this is the operating mantra at Goldman Sachs even after the bank’s near-death experience (when Solomon Bros stock was taking a hit, Blankfein knew his bank could be next).  As it turns out, the bank was involved in enabling Greece to stealthily spend beyond its means. Just after Greece had been admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means. Additionally, in late November, 2009— three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in Athens with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting. The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.[1]

The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.  

1. Louise Story, Landon Thomas, Jr., and Nelson D. Schartz, “Wall St. Helped to Mask Debt Fueling Europe’s Crisis,” The New York Times, February 13, 2010.