Grecian Burn - Credit Default Swaps

  • Aired:  06/22/11
  •  | Views: 124,553

Aasif Mandvi explains how Goldman Sachs helped Greek people to continue retiring a few years after puberty. (2:16)

YOGURT.

FOR MORE WE'RE JOINED BY AASIF

MANDVI LIVE IN ATHENS.

ASSIF, HOW DID EUROPE...

[CHEERING AND APPLAUSE]

FIRST OF ALL, HOW DOES THIS

AFFECT EUROPE?

FIRST OF ALL, HOW DID EUROPE NOT

KNOW THAT GREECE WAS IN THIS

TYPE OF FINANCIAL TROUBLE?

>> WELL, JON, IT'S FASCINATING.

TEN YEARS AGO WHEN GREECE

REALIZED THAT TO COVER EVEN AT

THAT TIME THEIR BIG DEFICIT,

THEY WERE GOING TO NEED AN

INFLUX OF CASH, THEY WERE VERY

SMART.

THEY CALLED AN AMERICAN

INVESTMENT BANK.

>> Jon: LET ME GUESS --

GOLDMAN SACHS.

>> VERY GOOD.

GOLDMAN SACHS CAME UP WITH A WAY

TO HIDE THE EXTENT OF GREECE'S

DEBT SO EUROPEAN BANKS WOULD

CONTINUE LENDING TO GREECE, AND

GREEK PEOPLE COULD CONTINUE

RETIRING A FEW YEARS AFTER

PUBERTY.

[LAUGHTER]

THE DEVICE THEY USED TO DO IT

WAS CALLED "A CURRENCY SWAP."

>> Jon: OH, OKAY, SO THE

EUROPEAN BANKS WHO BOUGHT THESE

SWAPS THOUGHT THEY WERE GETTING

SOMETHING FISCALLY SOUND WHEN

THEY WERE, IN THE PARLANCE OF

WALL STREET...

>> OH, JON, MAY I?

>> Jon: HORSE [BLEEPED], YEAH,

YEAH.

SO NOW THE EUROPEAN BANKS ARE IN

TROUBLE.

>> YES, BUT AFTER THEY BOUGHT

THE GREEK BONDS, EUROPE DID

SOMETHING VERY SMART.

JUST ON THE OFF CHANCE THAT THE

BONDS THAT THEY GOT FROM GREECE

CONTAINED HORSE [BLEEPED], THEY

TRANSFERRED THE RISK OF THESE

BONDS TO A THIRD PARTY USING A

DEVICE THAT COULD MAKE MATH THE

RISK OF THESE TRANSACTIONS

CALLED CREDIT DEFAULT...

>> Jon: MAY I?

SWAPS.

>> SWAPS.

EXACTLY.

>> Jon: WHO WAS THE THIRD

PARTY?

>> WELL, THAT IS THE BEAUTIFUL

THING ABOUT THIS.

BECAUSE OF OUR INABILITY TO

REGULATE THE SWAPS INDUSTRY, NO

ONE HAS ANY [BLEEPED] IDEA.

[LAUGHTER]

[APPLAUSE]

>> Jon: MAYBE AMERICAN BANKS,

INCLUDING THE SAME ONES WHO

ORIGINALLY HELPED GREECE CREATE

THESE HORSE [BLEEPED] SWAPS?

>> WELL, IS WHATLG THE SMART

MONEY SAYS, OR IN WALL STREET

PARLANCE,

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