Fed to investigate Goldman’s debt contracts with Greece

Federal Reserve Chairman Ben Bernanke told Congress Thursday that the central bank would investigate Goldman Sachs’ use of derivatives contracts with Greece.

“We are looking into a number of questions related to Goldman Sachs and other companies and their derivatives arrangements with Greece,” Bernanke said Thursday before the Senate Banking Committee.

Goldman Sachs helped raise $1 billion for Greece in 2002 using credit default swaps, which compensate investors when an investment (in this case, Greece) defaults.

European Union regulators have said that they knew nothing about the swaps until very recently, and an investigation has opened into whether Goldman Sachs intentionally helped conceal Greece’s debt.

Sen. Chris Dodd asked Bernanke whether there should be limits on the use of credit default swaps to prevent “the intentional creation of runs against governments.”

Bernanke responded, “Using these instruments in a way that intentionally destabilizes a company or a country is — is counterproductive, and I’m sure the SEC will be looking into that.”

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