WASHINGTON — Federal Reserve Chairman Ben Bernanke said the central bank is looking at derivatives transactions that Goldman Sachs Group Inc. and other U.S. banks made with Greece amid concerns that they might have been used to help the government hide its debt.
“We are looking into a number of questions related to Goldman Sachs and other companies and their derivatives arrangements with Greece,” Bernanke told the Senate Banking Committee, adding that the Securities and Exchange Commission is also exploring the issue.
Committee chairman Christopher Dodd, D-Conn., asked the Fed chief whether banks should be banned from using swaps to intentionally enable runs on a country.
In a second day of congressional testimony, Bernanke said credit-default swaps can be useful in hedging but added: “Obviously, using these instruments in a way that intentionally destabilizes a company or country is counterproductive.”
The European Commission has demanded details from Greece of the series of complex derivative deals in 2001 that helped conceal its debt.
Greece reportedly borrowed billions that year with help from Goldman Sachs in a deal that was not disclosed to the public because it was treated as a currency trade instead of a loan.
Bernanke also sought to defend the Fed’s regulatory powers over the banking sector Thursday, telling senators that taking away the central bank’s oversight of banks would be a “grave mistake.”
