Goldman Sachs CEO Lloyd Blankfein acknowledged fears about the state of the global economy but said he remains optimistic over the longer term, a day after his company announced a 12 percent hit to quarterly profits despite layoffs and other recent cost-cutting measures.
The Wall Street investment banker, speaking at a forum at the Economic Club of Washington on Wednesday, cited the debt crisis in Europe and the potential for a “fiscal cliff” of spending cuts and tax hikes in the United States as the primary reasons for ongoing worries over market stability.
“The sentiment is very bad and for real reasons,” Mr. Blankfein said. “We can spend a long time talking about all the problems and trying to hedge and adjust for them, but by and large I am optimistic because statistically things do work out.”
He said the wealthier nations of Europe had a strong interest in avoiding a complete collapse on the continent.
“I think that there is a not-insignificant possibility that there could be an unraveling, but I really don’t think it will happen,” he said.
On Tuesday, Goldman Sachs announced a 9 percent dip in total revenue from this time last year, dropping from $7.28 billion to $6.63 billion.
Yet the drop improved on more pessimistic estimates from market analysts, who were expecting the company’s revenue to sink as low as $6.28 billion.
Mr. Blankfein urged U.S. lawmakers to reach a compromise on how to address the fiscal cliff, which experts say could cripple market demand with the expiration of George W. Bush-era tax cuts and deep spending cuts both on track for the end of 2012 if Congress and the White House fail to cut a budget deal.
“The fiscal cliff as a major uncertainty is responsible for a real burden to the value and wealth of the world,” Mr. Blankfein said. He did not say specifically when asked by Economic Club President David M. Rubenstein whether he endorses a full extension of the Bush tax cuts, maintaining that the best solution is one that comes through a broad consensus.
“My kind of stability can only be achieved if everybody throws in at least a little,” he said.
While the desire for a compromise was well-received, some in the audience said they wanted the CEO to be more specific on issues such as the Bowles-Simpson deficit panel’s package of spending cuts and tax increases as a way to address the long-term deficit problem.
The Goldman Sachs chief wrote an op-ed released Wednesday in Politico that was sympathetic to the Bowles-Simpson approach, but he suggested Wednesday he could be flexible about a final package so long as a deal was reached.
“I would almost capitulate to either side rather than have these things go on,” he said.
On another issue, Mr. Blankfein struck a note of compromise again on the Dodd-Frank financial regulatory overhaul bill signed by President Obama in 2010, which presumptive Republican nominee Mitt Romney and many in the financial community have condemned as an overreaction to the global banking crisis of 2008. Mr. Blankfein said he would not support a total repeal of the law, although “some parts go too far.”
The roughly hourlong event was months in the making, according to Mr. Rubenstein, who said the luncheon was not deliberately timed to follow the release of the Goldman Sachs’ earning report or the CEO’s op-ed.
“I asked him a couple months ago, got organized and picked a date that would work out,” he said.
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