Goldman Sachs arranged swaps that effectively allowed Greece to borrow 1 billion Euros without adding to its official public debt. While it arranged the swaps, Goldman also sought to buy insurance on Greek debt and engage in other trades to protect itself against the risk of a default on those swaps. Eventually, Goldman sold the swaps to the national bank of Greece.Despite its role in creating swaps that may have allowed the Greek government to mask its growing debts, Goldman has no net exposure to a default on Greek debt, a person familiar with the matter says.Goldman is “flat” when it comes to Greece, the person said. Which is to say, its long and short exposure to a potential Greek default are in balance.In light of this combination of arranging structured financing while shorting the customer's debt, Goldman may find itself in a familiarly uncomfortable public light. Goldman has come under a barrage of criticism for structuring mortgage backed securities while its traders shorted that market. As a result of those short trades, Goldman lost far less money than its rivals when the US housing market imploded.Something similar is at work here and the criticism will likely follow along the same track. Goldman was uniquely well-positioned to understand that Greek debt service obligations were higher than they would have appeared just by looking at its official debt levels, making Greece a riskier credit. This knowledge may have allowed Goldman to acquire credit protection on the trades on the cheap.To our eyes, this entire line of criticism is off-base. Take mortgages. While some media accounts claim that Goldman made billions by shorting the housing market, the truth is that Goldman actually lost money during the worst of the mortgage meltdown. The billions it made on short trades were out-weighed by the billions lost on the long trades.Similarly, Goldman may have sought to protect itself against heavy losses from Greece because it was uniquely exposed to those losses. The terms of the swap meant that Goldman essentially made an upfront payment to Greece in exchange for a revenue stream later. If Greece defaulted on its obligation to keep that revenue stream flowing, Goldman stood to lose money. In such circumstances, Goldman’s short-trades against Greek debt may be nothing more than prudent precaution. It is quite common for banks to take out credit protection--that is, buy short trades--against assets such as loan and swap obligations due to them.Goldman first put the swap in place in 2001. It immediately sought to hedge its risk to the Greek obligations by making side deals with other parties. In 2005, the entire swap was sold to the National Bank of Greece. But last year, Goldman was back talking to the Greek government about a similar deal that would delay debt obligations.In some ways, this latest “scandal” must feel like déjà vu for Goldman Sachs. The Greek swap transactions were first reported in risk magazine as far back as 2003. Der Spiegel picked them up recently, the New York Times revisited the story on Sunday , and today Bloomberg has a hold of it