Lloyd Blankfein Chats With Charlie Rose
Published: May 03, 2010
As he did during the Senate hearing, Lloyd dodged some questions and gave some lectures on market making 101, but he also tried to dispel some of the many misconceptions floating around the financial media and Main Street dinner tables, and said Goldman badly need to do some "soul searching" (attempting to locate a soul appears to be the current PR tactic given to Lloyd, who mentioned the search for a soul more than once when speaking with Chuck). Here are some more highlights, as I saw it, from the low-lit interview:
Lloyd admitted that the "financial system failed the American people" and he "understands the little guys' hate for us." When asked if Goldman would have survived without TARP and government support, LB said he wasn't sure and is "glad we don't know" the answer. He also pointed out that TARP came after Goldman recapitalized itself, issuing more common equity shares as well as issuing preferred shares to Warren Buffett (who, over the weekend, threw his wholehearted support behind Lloyd).
As for how financial regulation would affect Goldman, Lloyd said that the Volcker bill (which would prevent securities firms like Goldman from engaging in proprietary trading—trading for their own accounts as opposed to clients' accounts) would make 10 percent of Goldman's revenues disappear. Rose said, That's it? To which Blankfein replied, "I care very much and work very hard for that 10 percent," meaning Lloyd is not going down without a fight against Volcker (it's important to note that Jamie Dimon, JPMorgan Chase's CEO, is also a huge opponent of Volcker, as it is to note that 10 percent is a low estimation—the affect would likely be higher).
When asked how Goldman would have reacted/operated any differently as a partnership (as it had operated for much of its history), LB said it would be "impossible" for the firm to operate as a partnership in today's environment (because it needs to have a huge balance sheet to compete) and that, internally at least, it does operate like a partnership, "treating its 400 most senior employees as partners."
As for why Goldman has been more successful than its competitors, LB said it's because the firm "hires the best people and retains them," and because "we get people who are really interested in doing something that they think is good for the public and for the world" (the former part of that answer seems spot on, the latter seems more than a bit suspect).
Given all that has transpired in recent weeks (not to mention in the past two years), LB admitted that Goldman "is not in a good place" and that if it were best for the firm he would bow out, relinquishing the chief executive position (though, later in the interview, LB made it pretty clear that he was not going anywhere, anytime soon).
LB also admitted that the firm is "in a hole" due to the "resentment and anger over the financial crisis" that Goldman "partially caused." He also noted (and this is an important point) that Goldman "didn't do anything uniquely wrong," meaning whatever the firm is ultimately judged to have done wrong (ethically or legally or both), those same things most likely to most definitely occurred at several other securities firms. Goldman, LB also said, is in the public eye now because it's "bigger and more prominent" than other firms (that is, it made more $$$; or lost less, depending on how you look at it).
LB added that though he believed Goldman "shares the burden" of the industry, he felt the firm has taken a "disproportionate" hit, meaning: Would you please go after another investment bank for a change?