In his current book, Yanis
In his current book, Yanis Varoufakis outlines some very intersting goings on with Greek finances.
Varoufakis wrote:
Here's how our two bankers – lets call them Aris and Zorba – did it.Aris' family founded offshore companies, to which Zorba agreed secretly to lend without guarantees the millions that Aris' bank needed. Why such generosity towards a competitor? Because Aris and Zorba were sitting under the same proverbial oak. Desperate to raise money for his own bank, Zorba agreed the loan on condition that Aris' bank lent a similar amount to Zorba's family's offshore outfits. Aris' and Zorba's families then used money from their offshore accounts to buy new shares in their own banks, thus fulfilling the regulator's requirements that new capital be raised and thereby qualifying for the real money that the poor taxpayer was borrowing from the troika….they ended up owing nothing to anyone. Both sets of loans … were written off soon after being granted and transferred to the banks's long list of non-performing loans.
He adds in a footnote:
Varoufakis wrote:
An even more outrageous trick was employed: in addition to millions from Zorba's bank, the Aris family's offshore companies also borrowed millions from Aris' own bank. These loans were also written off as unserviceable or non-performing, or were used to buy office space that was resold to other parties only to be leased back by the bank or sold to it at inflated prices. The newly conjured up funds, or 'profits' would be used to buy new shares in the bank, keeping up the pretence that investors were injecting private capital into them.
That's the banks, creating money through real fraud. Next, let's look at what the European Central Bank got up to.
Varoufakis wrote:
The ECB granted Greece's bankrupt banks the right to issue new IOUs with a face value of €5.2 billion – worthless peices of paper, given the banks' coffers were empty.As no sane person would pay money to buy these IOUs, the bankers took them to the finance minister..who stamped on them the bankrupt state's copper cbottomed guarantee – a really useless gesture, since no bankrupt entity (the state) van meaningfully guarantee the IOUS of another bankrupt entity (the banks).The bankers took the worthless IOUS to the central bank of Greece, which is, of course, a branch of the ECB, posting them as collateral for new loans.The Eurogroup gave the green light to the ECB to allow its Greek branch to accept these IOUs as collateral and, in exchange, give the banks real cash equivalant to 70% of the IOUs face value (a little more than €3.5 billion).Meanwhile, the ECB and Eurogroups gave [Greece's] finance ministry the green light to issue new treasury bills with a face value of €3.5 billion – IOUs issued by the state, which, of course, no investor in their right mind would touch given the emptiness of the state's coffers.The bankers then spent the €3.5 billion they had received from the central bank of Greece – in fact from the ECB itself – when they pawned their worthless IOUs in order to buy the state's worthless IOUs.Lastly, the Greek government took this €3.5 billion and used it to pay off ….the ECB!
You neeed to read that a few times, it's a method to allow Greece to not default on a debt it owed to the ECB.