Struggling Greece needed to conceal its deficit lest it get into trouble with the EU. American superbank Goldman Sachs had a solution: a nifty tool to conceal large loans under the guise of a currency swap, giving the illusion of a smaller deficit. Meanwhile, the bank made a pretty penny off the deal, collecting a hefty fee and betting at a discount price--with insider information--on the country's eventual default.

That's the story, at least, that the mainstream media have latched onto in the past few days. But was populist bugbear Goldman really up to no good, or is this being blown out of proportion? The opinion world is divided: while there's predictable anti-Goldman backlash to the story, a couple business bloggers say the bank's nearly blameless on this one.
  • One More Blow in the Class Struggle "Who knows," wonders Numerian at The Agonist, "how much has really been borrowed by various governments around the world? You would think this would be vital information available to citizens from their government economic bureaus, but clearly the Greek citizens didn’t know what was going on ... But Goldman Sachs did." This bothers the blogger: "What sort of international financial system is it that allows a private sector firm to have such information when it is not even available to the citizens who are responsible for repaying the debt?"
  • Goldman Toxic for PR  Simon Johnson notices that one of the top contenders for the position of president of the European Central Bank--Mario Draghi--is a former Goldman employee whose job included "'help[ing] the firm develop and execute business with major European corporations and with governments and government agencies worldwide.'" Did that include helping Greece deceive the rest of Europe? "You can pretty much count Mr. Draghi out of the running for the ECB job," decides Johnson. "For someone aiming high in the public sphere, work experience at the top levels of Goldman is fast becoming a toxic asset."
  • Conspiracy to Profit  Huffington Post blogger and Public Accountability Initiative co-director Kevin Connor wants to know if "hedge fund king" John Paulson was teaming up with Goldman, "once again, to profit from the downfall of an entire country/continent" by selling Greece the tools to hide its debt while standing to profit from a default.
  • This Isn't as Bad as It Looks  Business Insider's John Carney notes the easy criticism that, since Goldman was "uniquely well-positioned" to know Greek debt was higher than it appeared, it could also therefore have bet on default quite cheaply. Carney says this criticism is "off-base"--the bank was hardly likely to make a killing betting against its debtor, as it lost a ton of money doing this very thing with mortgages a few years ago. Also, Carney says, Goldman was essentially loaning a large sum to the Greek government, meaning "short-trades against Greek debt may be nothing more than prudent precaution"--a "quite common" measure for credit protection.
  • Europe, Not Goldman, to Blame Here, agrees Reuters's Felix Salmon--nor does he think Goldman made as much money off the transaction as reports would have us believe. He also argues that it's "a bit disingenuous of the EU to start saying now that Eurostat was not aware of the transaction"--there was an article about it back in 2003, and evidence that European officials did know of the scheme.
While it's entirely fair to blame Greece for trying to hide its debt, and to blame Eurostat for letting it do so ... blaming Goldman is harder ... Structuring swaps transactions is one of those things which investment banks do. If countries like Greece buy swaps in order to hide their true fiscal status, then that's the country's fault, not the banks'. ...

Yes, I'm sure that Goldman put a team of people onto the Eurostat rules and made that team available to the Greeks. But let's not blame the advisers here, for structuring something entirely legal and which the Greeks and Italians clearly wanted to be able to do all along. This is a failure of European transparency and coordination; Goldman is a scapegoat.