26 Feb 2010

Wall Street role in Greek debt probed

8:06 am on 26 February 2010

The role of Wall Street firms in deals that may have helped Greece mask its debt woes, are under scrutiny in the United States.

Federal Reserve chief Ben Bernanke said the Fed and a US financial watchdog are "looking into a number of questions" related to derivatives arrangements by banks with Greece.

But he stopped short of saying an official inquiry was underway by either the Fed or the regulatory agency.

Goldman Sachs was the only company which Mr Bernanke mentioned by name.

Earlier this week, a Goldman Sachs boss defended a debt-swap deal with Greece in 2001 that may have allowed the country to mask the extent of its debt woes.

Goldman Sachs Bank USA chairman Gerald Corrigan said it was "consistent" with the regulations of the time.

However, he admitted to a Treasury Select Committee in Britain that "with hindsight" the bank should have been more transparent.

The BBC reports the deal was legal at the time, but has since been prohibited.

A complicated "currency swap" financial deal between Greece and Goldman Sachs is being investigated by the European Union.

The EU has given Greece until the end of February to give details of how it affected its accounts.

Finance Minister George Papaconstantinou insisted last week that Greece was not the only one using such financial arrangements back in 2001.

Greece has a public deficit of 12.7%, more than four times higher than eurozone rules allow. Its national debt is 300 billion euros ($US419 billion).