Guest Post: The WSJ Blankfein Interview
Submitted by reader Deadhead
This weekend’s WSJ interview with Lloyd Blankfein of Goldman Sachs by Holman W. Jenkins, Jr. is worthy of commentary by both sides of the Goldman fence: those that subscribe to the theory that Goldman is the Matt Taibbi coined “..great vampire squid..” or those that have taken Mr. Blankfein’s recent public apology to heart and have accepted his words that “…Goldman wants to be a force for good…”.
The first impression of this writer after reading the piece is that perhaps Mr. Jenkins should have his own television show ala Chis Matthews named “Softball”. Where in the world are the “sweat” questions or follow ups to the theme outlined by Mr. Jenkins himself about “The Bank Everyone Loves to Hate”? The political and financial world is abuzz with overwhelmingly negative opinion about Goldman and its actions, yet Mr. Blankfein is barely nudged to address these matters nor does he or Mr. Jenkins offer examples of positive opinions or enthusiastic defenses of Goldman’s behavior.
The best we get on a macroscopic level is that Mr. Blankfein is “…more bemused than hurt by the slurs.” Instead of dissecting and pressing for elucidation of Blankfein’s bewilderment, Jenkins simply concludes that Blankfein’s “…serenity may be helped by the fact that the events we’re discussing - Goldman’s brush with death - appear to be firmly in the past.” Looks to me like Blankfein got a complete pass on the central theme of the article and the pervasive anti-Goldman zeitgeist. Oh, and as for that “…brush of death….firmly in the past” thing, isn’t that what has been suggested previously by some about Bear Stearns, Lehman, or, for those with a sense of history that lasts longer than the speed of a HFT trade, some of the companies previously on the Goldman conviction buy list from the dot com bust era?
The next item covered is the role of former “Goldmanites” in top echelons of the government, which has lead to an explosion of press coverage and blog chatter about numerous suggestions (often labeled as “tin foil hat conspiracies”) as well as allegations of conflict of interest and influence peddling. Yep, it was addressed. That’s about it. Really. One paragraph. Read it yourself. In the one paragraph, Jenkins indicates that Blankfein does not think Goldman is pulling strings. Okay, it’s a nice autumn day, so “Let’s play Softball!”
As to the financial crisis recap, there are a few items that caught my attention that readers might find interesting and worthy of comment.
Blankfein admits that he was “scared” during the financial crisis and if the financial system had collapsed, that Goldman “…would have been in that snowball tumbling down the hill with everybody else.” Curiously, Blankfein immediately goes on to “insist”, according to Jenkins, that Goldman was not especially at risk. To those Goldman critics who suggest that Goldman would have failed, Blankfein responds “I don’t think so. Our liquidity was huge.” Does anybody see a bit of a disconnect here?
Blankfein continues to insist that Goldman did not need TARP money, no surprise in that statement, as he and his peers have said this almost as frequently as Tim Geithner has vowed support for the US Dollar. He also reiterates that he regrets that Goldman could not have kept a greater distance from bailout efforts. Yet, when it comes to the FDIC-guaranteed debt program (bailout? Subsidy?), Blankfein boasts about Goldman being “..overachievers..” and as such, being the first bank to dive right in to the government backstopped, lower interest rate borrowing honey pot. Admitting that he did not foresee this government largesse as a “pejorative” (I think this means that taxpayers are getting really pissed off that banks like Goldman are making a fortune in the markets right now levered up with low cost money courtesy of the risk assumed by the American taxpayer), Blankfein expresses his joy at stopping at the 22 billion bucky mark. Says Blankfein: “I wish we’d stopped at zero.”
Lloyd, your wish can be granted! On Monday morning, put out a press release that Goldman will go to the capital markets immediately (a vital “social” role as you describe it) and Goldman will borrow money at current market rates to pay off the FDIC backstopped bonds and relieve the American taxpayer of the risk that we are currently assuming. Poof!! Your wish is granted.
Blankfein continues along the timeline of the crisis and notes that Goldman has had a long standing application before the Fed to become a bank holding company, which would allow Goldman to disassociate itself from its primary regulator, the SEC. I find remarkable what follows and so there is no confusion, I will quote verbatim the passage as written by Jenkins summarizing Blankfein on this bank holding company application: “The SEC’s imprimatur, he says, had become worthless after the Bear Stearns and Lehman debacles.”
Blankfein continues, in a direct quote: “What it looked like at the time was, the Fed had regulated its institutions well, and its validation was a good imprimatur. And the SEC had failed in its supervision, and its validation wasn’t good”.
Wow……… “worthless”, “failed”, and “its validation wasn’t good”. Hmmm, no comment here by this writer, I’ll wait for the forthcoming morsels from ZH and non ZH readers alike. I wonder if we will hear from those currently or previously employed by the SEC?