Blankfein preaches to choir with voice of bitter experience
Global investment banks have a "duty" to help policymakers design their post-crisis regulatory regimes, the chief executive of Wall Street bank Goldman
That's because investment banks can offer expert advice about the consequences of different regulations.
Lloyd Blankfein, who led Goldman Sachs during the financial crisis, is a polarising figure in modern finance.
His bank was a key player in the sale and purchase of complicated financial products that were linked to the US subprime mortgage market. When the market for those products unravelled, it contributed to the financial crisis in 2007.
Mr Blankfein came to Australia this week to meet investors and local staff, and he spoke at a business conference in Sydney on Friday.
It was a sometimes humorous, but self-serving presentation.
One of the highest paid executives on Wall Street - earning $US26million ($28 million) last year - Mr Blankfein was ushered into the conference by a team of private security guards. Media were not allowed to ask questions.
Sitting on a soft lounge with candles to provide an elegant backdrop, Mr Blankfein talked about the global economy, the political economic trauma in the US, and the push to regulate global finance in a post-crisis world.
He said the US was roughly three-quarters of the way through its post-crisis regulatory cycle.
The country's investment banks were obliged to help its policymakers design a new regulatory regime, he said.
"People seem to decry the lobbying of banks ... [but] we have the right, of course, and the knowledge to make forecasts of what the consequences of these things will be," Mr Blankfein said.
"I don't think we have just the right, I think we have the obligation [and] the duty, given what we know, to advise: 'Look, if you do this, this will be the consequence, you might not like the result'."
But it was uncertain what the final regulatory framework would look like.
"Foremost in people's minds [is] the recent drama which is driving that [regulatory] pendulum in one direction, and it may well stay there and it may move back the other way," he said.
Mr Blankfein also spoke about investment banks' unique ability to manage risk.
"The best year that Goldman Sachs had ever ... was 2009," he told the audience. "Why? That was the year that nobody wanted to take a lot of risk and everybody on the user side had to reorganise their portfolios, and we had the highest market shares we ever would have. I think it enhanced our reputation as being good market makers."
Mr Blankfein has been at the head of Goldman Sachs since 2006.
In 2010 he appeared before the US Senate after the Securities Exchange Commission charged his bank with fraud in relation to its sale of collateralised debt obligations (CDOs) in the lead-up to the financial crisis.
"Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO," SEC said.
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