Merkel Protests Too Much: Are German Banks Short The Euro? – 24/7 Wall St.

There have been a surfeit of articles recently bashing Goldman Sachs for playing both sides of the fence when it comes to dealing with their clients.

For example, this morning's New York Times notes the unease that Washington Mutual management felt in their dealings with Goldman, believing that the Goldman traders were shorting WaMu stock at the same time Goldman was providing financial advice to the bank.

(Turns out that WaMu management was correct, by the way - Goldman made millions correctly betting on the eventual demise of the largest S&L in the United States).

Now it appears that Goldman is not the only financial institution which plays this game.

According to the blog 24/7, one of the reasons that German Chancellor Merkel imposed the short selling ban on certain euro debt instruments as well as selected financial institutions was to try to restrain the activities of some major German institutions:

But, the real reasons behind Merkel actions may be more complex and sinister. There is a great deal of evidence that some of Germany’s large banks have bet against both the euro and sovereign debt in the weakest nations in the region. If so, these banks, like other speculators, probably made billions of dollars on such deals.

Merkel may have to deal with the accusation, probably an accurate one, that Germany allowed its banks to take sides against the euro as the government helped drive its value down. How would it look if Germany then left the Eurozone and its banks became, under a set of circumstances helped by Merkel, rich in the process?

When I first heard about the short selling ban I was puzzled, since a unilateral ban on German transactions seems to make little sense in a global marketplace. If this story is true, however, the actions seem more logical.

Merkel Protests Too Much: Are German Banks Short The Euro? – 24/7 Wall St.