Eavesdropping On Lloyd Blankfein (Maybe)
Senior Editor, CNBC.com
So was Goldman Sachs CEO Lloyd Blankfein trashing Tim Geithner in a Manhattan restaurant recently?
Earlier today, Bess Levin of DealBreaker revealed that one of her sources was sitting next to a Wall Street chief executive at dinner. The source overheard four bits of information. But Bess is playing coy and not revealing who the chief executive is.
Well, we think it's probably Blankfein. First, we'll give you the email from the DealBreaker source, followed by our rationale for pinning the tale on the Blankfein.
“Bess — [Redacted] was seated next to me at [Manhattan restaurant] last night. I figured given the s—storm Wall Street’s been through the last couple years he’d keep shop talk to a minimum. But, he didn’t hold back; I wasn’t making an effort to eavesdrop, but he’s not exactly the softest speaking gent in town and the tables are way too damn close. Anyway, his four main points I picked up:
1) The biggest systemic risk in the financial system is the Clearinghouse model. Over the next 20 years, if the current system of trade clearing does not change, we will have an event that made the past three years seem minor.
2) Geithner is helpless. [Redacted] said he’s incredibly smart but he can’t help you. Anytime anyone goes up to him with a problem, he’s incapable of giving an answer and is basically like an administrator at best. [Redacted] said something like, “It is like talking to a third party.”
[Redacted] compared him to Paulson, said “Hank was just the opposite.”
3) While discussing Congress: ”I don’t want to be around when the next financial crisis comes.” These guys don’t know what they are doing and can’t decide on anything. It will be much worse. ”Nobody is too big to fail.”
4) He’s as cool as the other side of the pillow. He said, “People always come up and ask me, ‘how are you doing?’” I respond, “I was fine until you asked me.”" ”Everyone expects me to be in pain after all that has gone on over the past couple of years, but to be honest with you, I don’t feel any of it.”
So why does this seem like Lloyd?
First, Blankfein is on record with his concerns that a new derivatives clearinghouse could be the biggest source of systemic risk in the global financial system. (By the way, he's dead right about this.)
Second, we've heard from others that Blankfein does not view Geithner as a powerful force in the administration. It's not so much that he has contempt for Geithner. It's closer to pity. "Geithner is helpless" sounds about right. (Note: the reports about Blankfein's attitude toward Geithner is second and third hand. We've never spoken to the Lo-Blanko himself about this.)
Third, the point about Congress is a push. Everyone thinks this way.
Fourth, it's hard to think of another currently sitting Wall Street CEO who would be approached by friends and asked "how are you doing" out of concern. Jamie Dimon may have fallen out with the Obama administration but he's still pretty much on top of the world. James Gorman at Morgan Stanley is new to the top spot. People are probably still high-fiving him. Same with Barclay's Bob Diamond. No one cares enough about Citi CEO Vikram Pandit's feelings to ask about them. That pretty much leaves Lloyd.
A call to Goldman Sachs to ask about our theory went unreturned.
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