First the continuing tragicomedy – Moody’s Investors Service today said it was reviewing ALL but one of Greece’s ABS, RMBS, CLO and covered bond transactions for possible downgrade to below Aaa.
That’s a BIG vote of no confidence in the Greek economy. The question is how many of these agreements have clauses in them that require capital to be posted in the event of a downgrade? The covered bonds could be a particular headache. If banks start to have to post capital it means they need cash immediately. That’s what causes defaults.
So that’s the tragedy, here’s the farce
Yesterday the head of the Greek government’s Debt Management Agency resigned, Can you believe they actually have a ‘debt management’ agency? Must be a crack outfit! Sort of Dad’s army of the financial world. These are the people who ‘managed’ to work with Goldman Sachs and JP Morgan to get Greece into the mess it’s in.
The farcical bit is that he is being replaced by Petros Christodoulou, who was head of Private Banking at the National Bank of Greece (that’s the bit that has ‘close’ ties to private, aka BIG banks that ‘help’ nations like Greece with their deficits. Got a sinking feeling yet? You should have.
Because before joining the Central Bank and faithfully serving the interests of all the Greek people Mr. Christodoulou was head of derivatives at JP Morgan, held a similar position at Credit Suisse, and… yes you guessed it, Goldman Sachs. Would those be the same banks that ‘helped’ the Debt Management Agency?
Now THAT’s what I call integrity – Free Market style!