Where Does Goldman Sachs Fit in the Greek Debt Crisis?

**Question:** An "article":http://www.nytimes.com/2010/02/07/business/07goldman.html in a recent edition of the NYT mentioned that Goldman Sachs had contracts with AIG in 2009 to insure its bearish position in the mortgage market. As the market fell, Goldman collected on its contracts. Another Times "article":http://www.nytimes.com/2010/02/07/business/global/07greece.html?pagewanted=all mentioned that Goldman underwrites (my terminology, not theirs) the national debt of Greece, which has now been downgraded. Is this another insured bearish bet by Goldman, who then can collect when Greek debt is further downgraded? **Paul Solman:** First, let's get the terminology straight. If Goldman "underwrites" Greek debt, that means it's selling it, as it did mortgage-backed securities in the bad old days. And indeed, there are reports that Goldman is trying to "place" (ie, sell) new Greek debt to China. But the key problem is that, back when it was selling those mortgage bonds, Goldman also BOUGHT insurance should they go bad: "credit default swaps." The charge, which we sketch in a piece slated to run tonight, is that they were insuring against the failure of the very products they were hawking. The question, then, is whether or not Goldman has again been buying CDS's that rise in value as the value of Greek debt sinks, while selling the very debt they're buying the insurance against. Rumor has it that Goldman IS buying, but I've seen nothing at all definitive. Perhaps a reader can correct me. As for the NYT Goldman-AIG article, it certainly seems damning. You might "read it":http://www.nytimes.com/2010/02/07/business/07goldman.html and then "Goldman's response":http://www2.goldmansachs.com/our-firm/on-the-issues/viewpoint/viewpoint-articles/aig-nyt-response.html on its home page and see which side of the case you find most plausible.