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U.S. officials are looking into the role that Goldman Sachs and other big banks played in the ongoing debt crisis in Greece. The company has been accused of helping Greece hide its financial problems from investors and regulators. But it also may have made the country's fiscal troubles even worse by helping investors bet on the possibility of a default.

NPR's Jim Zarroli reports.

JIM ZARROLI: As the Greek financial crisis lurches from bad to worse, some European officials have complained that part of the blame lies on this side of the Atlantic. And today came evidence that the allegations are being taken seriously. At a Senate Banking Committee hearing, Federal Reserve Chairman Ben Bernanke revealed that the central bank is beginning to investigate some of the allegations.

Mr. BEN BERNANKE (Chairman, Federal Reserve): We are looking into a number of questions related to Goldman Sachs and other companies and their derivatives arrangements with Greece.

ZARROLI: The charges involve what are called cross-currency derivatives sold to the Greek government nearly a decade ago. At the time, Greece was lobbying to get into the European Union. The derivatives sold by Goldman helped Greece conceal the extent of its debt from EU regulators and investors by taking it off the government's books. Tim Backshall is chief strategist at Credit Derivatives Research. He says there's nothing illegal about these transactions, but they're not usually used by sovereign governments, and the fact that they were has helped undermine the market's confidence in Greece.

Mr. TIM BACKSHALL (Chief Strategist, Credit Derivatives Research): What I think worries a lot of market participants is the not knowing, the uncertainty, and that the fact that these kind of deals were going on certainly makes you wonder what you don't know.

ZARROLI: More recently, Goldman has been hit with another set of allegations involving credit default swaps. These are a kind of complex financial instrument that enables investors to place bets on the financial condition of a company or a government, even if they don't have any financial ties to it. The market for credit default swaps is huge and Goldman plays a major role in it. In this case, Goldman joined with other big banks to set up a kind of index that helps investors measure the value of the swaps held against Greece and other countries.

Critics say this has turned into a kind of vicious cycle: Investors look at the index, see that a country's debt situation is growing worse, then they sell off its bonds, which makes the index go up even more. At today's Senate hearing, committee Chairman Christopher Dodd said this contributes to an atmosphere of crisis and makes it harder for the Greek government to borrow.

Senator CHRISTOPHER DODD (Democrat, Connecticut): Since there's no requirement that purchasers of credit default swaps actually own any of the underlying debt, we have a situation in which major financial institutions are amplifying a public crisis, what appear to be for private gain.

ZARROLI: Others say Goldman's role in the crisis is being greatly exaggerated and that it's being scapegoated for problems caused by years of poor fiscal management by the Greek government. For his part, Fed chairman Bernanke defended the use of credit default swaps, saying they were useful in helping companies and governments hedge against risk. But, he added...

Mr. BERNANKE: Obviously, using these instruments in a way that intentionally destabilizes a company or a country is counterproductive.

ZARROLI: The question for the Fed is whether Goldman actually did that and what impact its actions had. As for Goldman, a spokesman today declined to discuss the charges, saying the company never comments on legal or regulatory matters.

Jim Zarroli, NPR News.

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