I would ask all that are reading this to consider the implications--both long- and short-term--that this will have upon the Obama administration, and the 2010 midterms.

IMHO, the likelihood of what Johnson is foretelling us is about to occur in Europe is very high. The political fallout Democrats--not to mention our entire country--are already paying for these inevitable outcomes is totally unacceptable, and on many levels.

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Around 8:50PM on Sunday night, I posted a diary entitled, "First Greece; Now Spanish Intelligence Opens Wall St. Probe." (Not linking to it, since it'd be "pimping" of a live diary.) In it, I talked about how the Spanish Intelligence Agency is investigating "...the speculative attacks on financial markets against Spain." I also noted how the Spanish government actually knows exactly where their investigation's heading. That's due to a story that appeared on Zero Hedge, just five days ago.

Yes, Spanish intelligence authorities need look no further than a Zero Hedge story from Tuesday, February 9th, for a great deal of assistance in their new investigation (which is, in large part, taken from another Spanish publication): "First Greece, Now Spain: Moore Capital, Brevan Howard, Paulson As Well As JPM And Goldman Implicated In Spanish CDS Rout."



First Greece, Now Spain: Moore Capital, Brevan Howard, Paulson As Well As JPM And Goldman Implicated In Spanish CDS Rout

Submitted by Tyler Durden on 02/09/2010 09:47 -0500 Yesterday we reported on "concerted hedge fund attacks" rumors involving Greece. Today, via Alphaville, it appears that the mysterious hedge fund cabal strikes again, this time in Spain, and, more relevantly, this time there are names associated. If indeed these are the actors set on setting the world ablaze, they are more than likely the same ones who are involved in Greece, Portugal, Dubai, and elsewhere. Presenting: Moore Capital, Brevan Howard and Paulson & Co... Oh and JP Morgan and, ahem, Goldman Sachs. From Cotizalia (obviously this is a Google translation for the sake of time).





Development Minister and deputy secretary general of the PSOE, José Blanco, said yesterday that the sharp drop in the Spanish stock market last week was due to "attack" of financial speculators, who were "somewhat murky maneuvers" to punish the euro and weaker economies in the euro But who are these 'speculators' evil to which he referred to the minister of development? What are their names? How much money managed? For the trading desks of major international brokers have sounded in recent sessions Brevan Howard, Moore Capital and Paulson & Co, among others, Hegde funds that manage more than 500,000 million and are among the top ten. The total figure is nearly double industry. "There have been specific macro hedge funds, which are taking positions against the euro and against the CDS (insurance coverage of non-payment) of Spain," said a broker from abroad that term around 7% of the daily volume of the Spanish stock exchange. "When these guys are short against someone, there is nothing to do. Already suffer from investment banks in late 2008 when institutions like Merrill Lynch and Morgan Stanley saw their CDS exceeded the benchmark of 2,000 points. Among others who have been short are the hedge funds at Goldman Sachs and JP Morgan, according to financial sources say...



As I also covered it this past Tuesday, IMHO, the reality is that Wall Street's historical greed has--to a great extent--undermined much of the goodwill our new President has worked to developed in his first year in office. (I covered this developing story, last Tuesday, right here: "Does Wall Street Now Openly Control U.S. Foreign Policy, Too?")

TRUTH AND CONSEQUENCES...

Now, tonight (about an hour after I posted my previous diary, a few hours ago), highly-respected economist Simon Johnson is telling us--for all intents and purposes--it's too late...



"Goldman Goes Rogue - Special European Audit To Follow"

Simon Johnson

Baseline Scenario

February 14, 2010 ...We now learn - from Der Spiegel last week and today's NYT - that Goldman Sachs has not only helped or encouraged some European governments to hide a large part of their debts, but it also endeavored to do so for Greece as recently as last November. These actions are fundamentally destabilizing to the global financial system, as they undermine: the eurozone area; all attempts to bring greater transparency to government accounting; and the most basic principles that underlie well-functioning markets. When the data are all lies, the outcomes are all bad - see the subprime mortgage crisis for further detail. A single rogue trader can bring down a bank - remember the case of Barings. But a single rogue bank can bring down the world's financial system. Goldman will dismiss this as "business as usual" and, to be sure, a few phone calls around Washington will help ensure that Goldman's primary supervisor - now the Fed - looks the other way. But the affair is now out of Ben Bernanke's hands, and quite far from people who are easily swayed by the White House. It goes immediately to the European Commission, which has jurisdiction over eurozone budget issues. Faced with enormous pressure from those eurozone countries now on the hook for saving Greece, the Commission will surely launch a special audit of Goldman and all its European clients...



Johnson continues on to tell us: "...Goldman will probably be blacklisted from working with Eurozone governments for the foreseeable future...Goldman may be on its way to be banned from some government securities markets altogether."

In closing, Johnson conveys the reality that there is a fundamental question now facing the US government: "...For how long does it wish to be intimately associated with Goldman Sachs and this kind of destabilizing action? What is the priority here - a sustainable recovery and a viable financial system, or one particular set of investment bankers?"

If our government doesn't put a real saddle on Wall Street, others will see to it that all Americans will pay the price. In fact, we already are.

Our government's failure to either break-up and/or put a saddle--not continuing to engage in ongoing kabuki--on firms like Goldman-Sachs is quickly morphing into the biggest travesty in the history of this country. And, the saddest thing about it all is that it's taking people outside of the U.S. to make our own government do the right thing ... maybe ... if we're real lucky.

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(h/t to Kossack Kristina40)

UPDATE (This appeared on Bloomberg about 90 minutes ago): "EU Seeks Greek Swaps Disclosure After Ministry Probe (Update1)"