Greecefire Started By……The Grecian Government?

23 Mar

In a kabuki theater only suitable for the European Continent, it has been discovered that The Hellenic Post Bank (TT) bet against the solvency of its own government!

In August (2009), the bank bought credit default swaps (CDS) – a form of insurance on financial instruments – worth 950 million euros when the spread on the Greek five-year bond over the German Bund was at 135 basis points.

And how important was this position?  Quite – it was fifteen percent of the total CDS exposure on Greece, and taken for the purpose of hedging a possible insolvency of…. itself!  (well, ok, it's parent)

The bank’s position in CDS protected the lender from its exposure in Greek bonds but also provided it with an opportunity to play a part in the global CDS market worth some 8 billion dollars last year.

With a position totalling 950 million euros, or 1.2 billion dollars, TT had the ability to shape momentum in the speculative derivatives market which the Greek government wants to be controlled.

Play a part eh?

Amusing, really.  Now Papandreou wants CDS "regulated" – after they blew up in the nation's face, in no small part because a bank owned by the government itself was speculating that the very same government would collapse in a smoldering fiscal pile of ash!

If you needed more on why these "contracts" need to be barred and the people responsible for this "business opportunity" tarred and feathered, well…

(Never mind that the TT's management likely traded on inside informationthat is, the knowledge that Greece's books had been cooked!)

And what has Papandreou said about "speculation"?

“We are in a state of war, in a battle against special interests, both at home and outside Greece. It is a battle against speculators and for transparency, so that markets are at the service of the people, not the other way around.”
– Greek Prime Minister George Papandreou, March 19.

Oh really?  Did you include your own institution in that list of "speculators"?


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