NEW YORK (TheStreet) — Though many people — even some non-bankers — are tired of what they see as a solid 18 months of attacks on banks by Congress, regulators and the public, there is plenty of evidence to suggest we are just getting started.
While the New York Times went over well-trodden ground earlier this month with an investigation into Goldman Sachs' (Stock Quote: GS) role in the meltdown of AIG (Stock Quote: AIG), the newspaper appears to have done more damage with a somewhat newer line of inquiry: the role of Goldman in the current Greek debt crisis.
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It seems Goldman helped Greece mask its debt from European regulators through certain sophisticated derivatives transactions, the Times reported on Saturday. The article noted that JPMorgan Chase (Stock Quote: JPM) performed similar wizardry of the books of the Italian government. The Financial Times followed up Monday, reporting that The New York Times article was prompting an investigation by European Union authorities into the Greek transaction. An additional followup, by The New York Times' Floyd Norris, compared the deals to one involving Enron that came to light several years ago.
As the sovereign debt crisis threatens to spread from Greece to other European countries, so, surely, will the web of culpability expand to ensnare other investment banks, not to mention provide fresh evidence of questionable transactions by those already implicated, which include not just Goldman and JPMorgan, but France's BNP Paribas, Germany's Deutsche Bank (Stock Quote: DB), and two Greek banks, EFG Eurobank and National Bank of Greece.
Indeed, the revelations about banks helping clients rack up unsustainable debt loads are likely to multiply far beyond real estate and European sovereign debt. The particular genius of bankers during the securitization boom was their ability to find more and more uses for securitization.
Most of the focus of the crisis so far has been on real estate, but real estate securitization is old hat. Pooling mortgages together and dividing them into slices that could be sold as bonds was popularized by Salomon Brothers — now part of Citigroup (Stock Quote: C) — in the 1970s, as we know from Michael Lewis' Wall Street classic, Liar's Poker.
By 2005, the practice had expanded to encompass credit card and auto loans, settlements from cigarette lawsuits, infrastructure projects, toll roads and life insurance policies, to name a few. In identifying scandals and linking them to Wall Street innovation, it would seem we still have plenty of ground to cover. Not to mention that even as we are trying to fully understand the causes of the last crisis, we are sowing the seeds for the next one.