Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin.
Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers.These contracts, known as credit-default swaps, effectively let banks and hedge funds wager on the financial equivalent of a four-alarm fire: a default by a company or, in the case of Greece, an entire country. If Greece reneges on its debts, traders who own these swaps stand to profit.
As Greece’s financial condition has worsened, undermining the euro, the role of Goldman Sachs and other major banks in masking the true extent of the country’s problems has drawn criticism from European leaders. But even before that issue became apparent, a little-known company backed by Goldman, JP Morgan Chase
and about a dozen other banks had created an index that enabled market players to bet on whether Greece and other European nations would go bust.
Its things like this that give bankers a bad reputation. It seems that they are attempting to force an entire country to go bankrupt in order to profit. With the global economy still struggling to recover, a country that defaults would delay any global recovery. It seems that the bankers are only looking out for themselves and trying to put bonuses into their pockets again. This time, at the expense of another country.
I do not know what happened with the bailout since it seemed that 2 weeks ago, Germany agreed to help with. It seems that it is under question again.
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