Greece has been in the news for a host of bad reasons in the past weeks.  Essentially the country, like much of the US, has been living off of ever-inflating debt, and suddenly it was noticed.  Boom!  Locked into the European Union Greece has no independent currency to print, so as credit whistles out of the bubble and the shimmering walls of a pseudo prosperity collapses it threatens the entire  EU — sort of like what will happen in the US if California is declared insolvent.

Well, it turns out that our old friends at Goldman Sachs had a big hand in the big mess — and, while helping Greece disguise its debt problems, back when it would have been easier to deal with, Goldman also bet that eventually the patient would die — and took out insurance policies to cover itself.

Both the Federal Reserve and the SEC are getting involved.  Hope they do a better job than the Department of Justice did in the investigation of Torture, Inc – John Yoo and friends. (Naughty naughty. Tsk Tsk)

Greece’s problems deepened on both sides of the Atlantic as the Federal Reserve disclosed it was investigating Goldman Sachs and other banks that helped the country mask its debts, and investors grew increasingly leery of lending any more money to a nation flirting with default.

Ben S. Bernanke, the Federal Reserve chairman, told Congress Thursday that the Fed was “looking into a number of questions relating to Goldman Sachs and other companies and their derivatives arrangements with Greece.”

Mr. Bernanke said the Securities and Exchange Commission was also concerned about how derivatives — financial instruments that are largely unregulated and do not trade on public exchanges — have contributed to Greece’s problems. “Obviously, using these instruments in a way that intentionally destabilizes a company or a country is counterproductive,” he said.

The S.E.C., in a statement, said that it could “neither confirm nor deny the existence of an investigation,” but added that it was cooperating with United States and international regulators in examining “potential abuses and destabilizing effects related to the use of credit-default swaps and other opaque financial products and practices.”

NY Times