Amid Record Bonuses Goldman Sachs Enabled Greek Debt

The person who has the gold makes the rules.  I suspect this is the operating mantra at Goldman Sachs even after the bank’s near-death experience (when Solomon Bros stock was taking a hit, Blankfein knew his bank could be next).  As it turns out, the bank was involved in enabling Greece to stealthily spend beyond its means. Just after Greece had been admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means. Additionally, in late November, 2009— three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in Athens with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting. The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.[1]

The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.  

1. Louise Story, Landon Thomas, Jr., and Nelson D. Schartz, “Wall St. Helped to Mask Debt Fueling Europe’s Crisis,” The New York Times, February 13, 2010.

The European Union: Dissolution or Consolidation?

In its 1993 Maastricht decision, the German Constitutional Court ruled that national authorities are not bound to respect and apply Community law to the extent that it exceeds the outer boundaries of Germany’s transfer of sovereignty to the E.U.  The Court also ruled that no transfer of sovereignty is valid to the extent that it results in a violation of the fundamental individual rights guaranteed in the German Constitution.  Nevertheless, a subsequent ruling on this subject indicated a willingness to rely on the European Court of Justice (ECJ) for the vindication of those fundamental rights.

The complete essay is at Essays on Two Federal Empires.

On the Merger of Comcast and NBC: A Structural Conflict of Interest

On January 18, 2011, Comcast received government approval to acquire NBC Universal. This followed a lengthy review, which mandated a list of conditions. The most important of them is aimed at preventing the new media conglomerate from thwarting competition in online video. However, even though regulators described their review as the most intense scrutiny ever for a planned media merger, Comcast managers said they believed their company faced few onerous restrictions from the review. “I don’t think any of the conditions are particularly restrictive,” said David L. Cohen, executive vice president of Comcast.[1] This statement ought to give readers some pause.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1. Tim Arango and Brian Stelter, "Comcast Receives Approval for NBC Universal Merger," The New York Times, January 19, 2011.

The Revolving Door: A Public-Private Sector Conflict of Interest

In Illinois, at least as late as 2011, state and local legislators could use their position to benefit paying clients. According to The New York Times, fourteen elected officials in Cook County, where Chicago is located, were registered as lobbyists in the 2009-2011 period and had clients who did received government contracts in Illinois. Rep. Fred Crespo observes, “When I see them [the law makers] at a hearing in the Capitol, I often can’t tell of they’re here for their constituents or for their paying clients.” Legislators in Illinois “can legally vote and otherwise act on matters that directly benefit their lobbying clients.”[1] As this involves a conflict of interest, which is inherently unethical, this case demonstrates for us the contention of ethicists that ethics as a field is distinct from law.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1. Mike McIntire and Michael Luo, “When Santorum Left Senate, Some He Aided Found Him Work,” The New York Times, January 6, 2011; John Sullivan and Fredric Tulsky, “When Office Holders Also Represent Clients, Collisions Are Likely,” The New York Times, January 6, 2011; and Fredric Tulsky and John Sullivan, “Is It a Conflict? Yes, But It’s Legal,” The New York Times, January 6, 2011.