Goldman swap shows Greece was Europe’s subprime nation

24 January 2012Articles, Banksderivatives, eurozone, Goldman Sachs, sovereign debtNick Dunbar

All the talk about Greece trying to persuade its creditors to swap some once-valuable bonds for new ones worth much less reminds me of another Greek swap that I wrote about in 2003. That deal with Goldman Sachs, designed to conceal part of the country's ballooning debt-to-GDP ratio in order to conform to the rules…

From hedge fund manager invective to EU veto

13 December 2011Articlesderivatives, eurozone, hedge fundsNick Dunbar

Hearing David Cameron's justification for his rejection of last week's proposed EU treaty changes on the basis that he was defending the City of London as a financial centre, I was reminded of a talk given back in April by Michael Hintze, the head of $11 billion hedge fund CQS and a major Conservative party…

We Need to Talk About Sovereign Credit Default Swaps

31 October 2011Articlesderivatives, eurozone, sovereign debtNick Dunbar

You've seen the movie. Some bankers become the proud parents of a new-born financial instrument. At first, little CDS seems like everything a parent could want "“ a hedge against the downsides of middle-class existence. But as CDS gets older, disturbing signs appear. CDS is too knowing, too negative "“ focused on the financial death…

The Eurozone, political dreams and financial engineering

24 October 2011Articlesderivatives, eurozone, sovereign debtNick Dunbar

How do you turn uncertainty into safety? The euro was supposed to replace the uncertainty of doing business between multiple countries with a single economic entity, so safe that its members could borrow money close to the price paid by the strongest, Germany. One good thing about financial markets is that they put a price…

Déjà Vu All Over Again

8 August 2011Articlescentral banking, eurozone, sovereign debtNick Dunbar

Are we on the verge of another Lehman weekend? The crisis of September 2008 unfolded in several stages: 1) a long bubble in subprime and credit markets in general, in which Lehman and other banks profited from by increasing their balance sheet leverage, 2) following a realisation that subprime was a haven of fraudulent lending,…

An imaginary wolf pack

22 December 2010Articlescredit default swaps, eurozone, hedge fundsNick Dunbar

1st December 2010 Politicians' attempts to blame hedge funds for the euro zone crisis are desperate. Disappointingly for the conspiracy theorists, the idea that a cabal of Soros-style speculators is engineering a meltdown is an unlikely explanation of current market turmoil. What appear to be coordinated bets against European sovereigns have less sinister explanations. Firstly,…

Back to the future

22 December 2010ArticlesAccounting, eurozone, pensionsNick Dunbar

23rd November 2010 Policymakers trying to find a fair resolution to the current European debt crisis might benefit from the insights of a taxpayer beamed back in time from 2050. That may be impossible, but economists are attempting the next best thing by discounting pension promises and tax revenues and comparing them with today's more…

The ballad of Ireland and Germany

15 November 2010Articleseurozone, public policy, regulationNick Dunbar

While the drama of Ireland's financial crisis reached a boiling point last week, I thought about the time I stayed near Dublin some twenty years ago. The infrastructure was decrepit, and I remember a hand-painted sign erected on the highway that read 'Please Minister Flynn, repair our awful roads'. As I visited the country periodically…

My best ever scoop?

1 March 2010Articlesderivatives, eurozone, sovereign debtNick Dunbar

The pressure of a second draft deadline for my book was not quite enough to make me ignore the excitement about Goldman Sachs and Greece, especially since I was the one that broke the story six and a half years ago. You can read my reflections on the Goldman deal and its aftermath in this…

Goldman, Greece and a troubling tango

1 March 2010Articles, Comment, Risky Financeeurozone, Goldman Sachs, Greece, Risky FinanceNick Dunbar

Risky Finance 18 February 2010 Six-and-a-half years ago, Goldman Sachs found itself reading about a huge derivatives transaction that was meant to have been kept top secret. The story, which I published in Risk magazine in July 2003, detailed how the bank had used giant customised swap transactions to help Greece's public debt management agency…