CNBC Exclusive: CNBC Transcript: Goldman Sachs Chairman and CEO Lloyd Blankfein Speaks with CNBC’s Wilfred Frost on “Power Lunch” Today

WHEN: Today, Tuesday, May 9th

WHERE: CNBC's "Power Lunch"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Goldman Sachs Chairman and CEO Lloyd Blankfein and CNBC's Wilfred Frost on "Power Lunch" (M-F, 1PM-3PM ET) today, Tuesday, May 9th. Following are links to the video on CNBC.com:http://video.cnbc.com/gallery/?video=3000617073, http://video.cnbc.com/gallery/?video=3000617074, http://video.cnbc.com/gallery/?video=3000617076 and http://video.cnbc.com/gallery/?video=3000617077.

All references must be sourced to CNBC.

WILFRED FROST: HEY THERE MELISSA THANK YOU VERY MUCH. INDEED, AS YOU SAID, I'M HERE WITH THE CHAIRMAN AND CEO OF GOLDMAN SACHS LLOYD BLANKFEIN. GOOD AFTERNOON TO YOU. THANKS SO MUCH FOR JOINING US.

LLOYD BLANKFEIN: THANK YOU FOR HAVING ME.

FROST: I WANT TO START WITH A VIEW ON THE ECONOMY, STATESIDE IN PARTICULAR. YESTERDAY, WE HAD WARREN BUFFETT ON OUR AIR AND HE SAID THAT HE DID NOT THINK DONALD TRUMP HAD YET HAD MUCH EFFECT ON THE ECONOMY. DO YOU AGREE WITH THAT?

BLANKFEIN: WELL, I THINK HE'S HAD ONE EFFECT. I THINK HE'S RAISED EXPECTATIONS THAT THERE'LL BE POSITIVE CHANGE TOWARDS STIMULUS. LOOK, THEY WILL EITHER – IF HE'S SUCCESSFUL, THERE'LL BE A LOT OF IT. IF HE'S UNSUCCESSFUL, THERE'LL BE A LITTLE BIT OF IT. BUT THERE'S NOT GOING TO BE NONE OF IT AND IT DOESN'T FEEL LIKE IT'S GOING TO GO BACKWARDS AS IT MIGHT HAVE. AND I'M TALKING STRICTLY ABOUT STIMULUS HERE. IF HE HADN'T GOT ELECTED, AND IF INSTEAD OF THE CURRENT PROGRAM, WE HAD A PROGRAM THAT CALLED FOR MORE REGULATION, HIGHER TAXES AND I GUESS BOTH PLATFORMS CALLED FOR MORE INFRASTRUCTURE SPENDING. BUT CERTAINLY THE PLATFORM, TRUMP'S PLATFORM, IS STIMULATIVE ON THOSE GROUNDS SO HE WOULD BE MORE OR LESS SUCCESSFUL. SO THERE'S GOT TO BE SOME MORE STIMULUS THAN WE WOULD HAVE HAD.

FROST: AND THAT VIEW OF DELIVERING 3% REAL GDP GROWTH FOR A SUSTAINED PERIOD, IS THAT ACHIEVEABLE IN YOUR EYES?

BLANKFEIN: WELL, I'M NOT GOING TO CONTRADICT BEN BERNANKE PER SE, BUT I THINK THE ECONOMY COULD GROW AT A FASTER RATE THAN IT'S GROWING. I THINK THEIR EXPECTATION IS GOING TO BE PLUS OR MINUS AROUND 2%. SO I DON'T KNOW WHETHER THAT'S 2.5% IS THE GOAL OR 3%, BUT I'M NOT GOING TO FIGHT WITH THAT.

FROST: AND IF WE SWITCH FROM THE ECONOMY TO THE MARKET, VALUATIONS RELATIVELY FULL AT THE MOMENT. VOLATILITY VERY, VERY LOW.

BLANKFEIN: YES.

FROST: DO YOU THINK WE'RE PRICED FOR PERFECTION SOMEWHAT AT THE MOMENT?

BLANKFEIN: WELL, EVERY TIME I GET ACCUSTOMED TO LOW VOLATILITY LIKE WE WERE TOWARDS THE END OF THE GREENSPAN ERA, AND WE THINK WE HAVE ALL THE LEVERS UNDER THE CONTROL AND THERE'S LOW RISK IN THE WORLD AND THE WORLD IS AWASH WITH LIQUIDITY THAT POUNCES ON EVERY ABORATION IN THE MARKET SO THINGS GO IN. SOMETHING ERRUPTS TO REMIND US OF OUR – THAT THAT IDEA THAT ANYBODY IS IN CONTROL OF ANYTHING IS HUBRIS AND THE WORLD DOESN'T PERFORM LIKE THAT FOR LONG PERIODS OF TIME. SO I DON'T KNOW WHAT BRINGS US OUT OF THE DOLDRUMS, BUT MY EXPECTATION IS THAT THIS IS NOT A NORMAL RESTING STATE.

FROST: AND I MEAN YOU MENTIONED THE GREENSPAN ERA, YOU BEEN THROUGH AND OVERSEEN LOTS OF CYCLES. SO, ARE THERE WARNING SIGNS THAT YOU ARE LOOKING AT AT THE MOMENT THAT ARE FLAGGING TO YOU OR NOT?

BLANKFEIN: WELL, I SAY NOT A LOT. NOT AS MANY WARNING SIGNS AS WILL BE AVAILABLE TO ME IN HINDSIGHT AFTER THERE'S A PROBLEM. AND I WILL SWEAR TO YOU AND I WILL REALLY THINK I SAW THEM. BUT I WOULD SAY IN PROSPECT, I'M A LOT – I'M MUCH BETTER AT PREDICTING THE PAST THAN THE FUTURE. I WOULD SAY IF I HAD TO LOOK FOR ANYTHING SPECIFICALLY, I WOULD SAY ASSET PRICES ARE HIGH, BUT A LOT OF ASSET – YOU KNOW, LIKE REAL ESTATE – SOME OF THOSE HAVE SLOWED UP AND SOME OF THEM HAVE COME DOWN. CREDIT IS VERY TIGHT. SO, I WOULD SAY DISTRESSED CREDIT AS PEOPLE SEARCH FOR YIELD, I COULD SAY MAYBE IN HINDSIGHT IT WILL APPEAR THAT A LOT OF THE MOVE INTO EQUITY, AND SPECIFICALLY PASSIVE EQUITY, IS BASED ON THE IDEA THAT EQUITY IS ALL CORRELATED, THAT INDIVIDUAL COMPANIES DON'T MATTER, INDUSTRIES DON'T MATTER. BECAUSE WE'RE LOOKING AT A YIELD IN DIVIDENDS AND YOU NORMALLY ASSOCIATE YIELD WITH FIXED INCOME AND NOT WITH EQUITY. WHERE YOU THINK OF RETURNS, BUT PEOPLE ARE PLOWING MONEY INTO EQUITIES BECAUSE THE DIVIDENDS ARE HIGHER THAN THE INTEREST THAT SOME OF THESE COMPANIES ARE PAYING. THAT MAY BE EVIDENCE OF A BIT OF A BUBBLE. THE LOW VOLATILITY ITSELF MIGHT BE A KIND OF BUBBLE OF CONFIDENCE, BUT WE WON'T KNOW UNTIL WE KNOW. MY OWN EXPECTATION, WHICH I NEVER RELY ON, LOOK, I ALWAYS DIFFERENTIATE FORECASTING WHAT DO YOU THINK WILL HAPPEN FROM THE EXERCISE OF RISK MANAGEMENT. IN RISK MANAGEMENT, I DON'T CARE WHAT ANYBODY THINKS. I DON'T CARE WHAT I THINK. I'M JUST PREPARING FOR CONTINGENCIES. ON THE OTHER HAND, IN OUR TRADING BUSINESSES AND TRYING TO ANTICIPATE FLOWS AND WHAT CLIENTS WANT TO ACCOMPLISH, THERE I HAVE TO TRY TO GUESS THE FUTURE AND WHERE THING ARE GOING. SO THOSE ARE TWO DIFFERENT EXERCISES. MY OWN VIEW FROM A MARKET POSITIONING POINT OF VIEW IS THAT WE'RE MUDDLING THROUGH, A LOT COULD GO WRONG, BUT I THINK THE BASE CASE IS THAT THINGS ARE GOING RIGHT.

FROST: IN TERMS OF PREPARING, I SUPPOSE THE BANKING SECTOR AS A WHOLE IS FAR MORE PREPARED THAN IT USED TO BE. IF WE MOVE THE CONVERSATION ON TO POSSIBLE DEREGULATION, DO YOU THINK THE U.S. BANKING SECTOR IS OVERCAPTIALIZED AT THE MOMENT?

BLANKFEIN: I DO. I DO. LOOK, WE HAD A VERY – THE SYSTEM HAD A VERY, VERY BIG TRAUMA AND WE LEGISLATED VERY QUICKLY. THERE WAS A LOT OF DEMAND FOR IT. AND THE ISSUE WAS WHAT SHOULD WE DO? SHOULD WE REGULATE CAPITAL, SHOULD WE REGULATE LIQUIDITY, SHOULD WE PREPARE FOR THESE THINGS NOT WORKING AND HAVE TESTS FOR HOW PEOPLE WOULD RESPOND IN CASE THERE IS A CRISIS – OR A RESOLUTION, THE NEED TO A CALL FOR RESOLUTION. THERE'S EVEN A TEST, THERE'S EVEN A REGULATORY OVERLAY THAT TRIES TO DEFINE YOUR STATE OF MIND – WHY YOU TOOK ON A POSITION. THEN WE HAVE THE VOLCKER RULE, WHICH OF THESE SHOULD WE DO? LET'S DO ALL OF THEM. THE NET EFFECT OF LAYER ON LAYER ON LAYER IS THAT EVERY INCREMENTS AT EVERY LAYER PROVIDES LESS INCREMENTAL SAFETY AND SOUNDNESS, BUT MORE OF A BURDEN ON RISK TAKING AND DOING THE VERY THINGS THAT A FINANCIAL SYSTEM IS SUPPOSED TO ACCOMPLISH, LIKE TAKING ON CERTAIN RISKS SO THAT COMPANIES AND INDIVIDUALS CAN DEPLOY THEIR CAPITAL AND WITHOUT FEAR OF A CERTAIN KIND OF RISK THAT BANKS WOULD TAKE ON FOR THEM. AND SO NOW THAT THE TRAUMA HAS EBBED A BIT, WE SHOULD LEARN THE REAL LESSONS OF THE PAST, BUT I THINK SOME OF THE – AND I'LL SAY OVERREACTION, I KNOW PEOPLE WILL BE CRITICAL OF THAT STATEMENT – BUT YOU CAN ALWAYS DRAW OUT INCREMENTAL SAFETY, BUT IT ONLY COMES AT A COST. AND I THINK NOW THIS DISTANCE FROM THE TRAUMATIC EVENTS PEOPLE HAVE TO TAKE ACCOUNT OF THE COSTS.

FROST: AND IF CAPITAL RULES WERE SOMEWHAT RELAXED, WHAT WOULD YOU DO WITH THAT CAPITAL? WOULD IT BE STRAIGHT BACK TO SHAREHOLDERS OR REINVESTED ELSEWHERE?

BLANKFEIN: SOME OF IT WOULD BE REINVESTED, SOME OF IT MIGHT GO BACK TO SHAREHOLDERS. BUT I DON'T THINK THERE'S THAT BIG OF A DICHOTOMY FROM A POINT OF VIEW OF PUBLIC POLICY AND THE RIGHT THING TO DO. LOOK, IF I SAW WAYS OF INVESTING IN OUR BUSINESS AND EARNING A HIGH RETURN ON THAT, THEN I SHOULD INVEST THAT MONEY. BUT IF I DON'T SEE IT AND I RETURN IT TO MY INVESTORS, WHAT DO THEY DO? THEY TAKE THAT MONEY AND REINVEST IT IN PLACES WHERE THEY THINK THERE WILL BE A HIGHER RETURN. ONE WAY OR ANOTHER, THAT MONEY WILL BE REINVESTED. IF I DON'T EXERCISE THAT JUDGMENT FOR MY SHAREHOLDERS, IT'S THEIR MONEY, LET THEM EXERCISE IT. SO, I KNOW SOME PEOPLE WILL SAY, "WELL, IF YOU ALLOW PEOPLE TO DIVIDEND MORE, RETURN SOME MONEY THAT'S OVERSEAS, RETURN THAT TO THEIR – GIVE IT TO THE COMPANIES OR FORGIVE SOME TAX THAT MIGHT OTHERWISE BE DUE, IT WILL ONLY RETURN IT TO THEIR SHAREHOLDERS." I SAY YEAH, AND THE SHAREHOLDERS WILL THEN INVEST IT WHERE THEY THINK THE RETURNS ARE THE HIGHEST AND THAT'S A VERY POSITIVE EFFECT FOR THE WORLD.

FROST: WE BRIEFLY TOUCHED ON VOLCKER A MOMENT AGO. DID PROP TRADING ITSELF CAUSE THE FINANCIAL CRISIS?

BLANKFEIN: NO IT DIDN'T. BUT I COULD UNDERSTAND – LOOK, WHEN YOU GO OUT AND REREGULATE THE SYSTEM, I DON'T THINK YOU SHOULD BE STOPPED AND JUST ADDRESS THOSE ISSUES THAT WERE THE PRECISE CAUSE OF THE FINANCIAL CRISIS. THE CAUSE OF THE FINANCIAL CRISIS WAS A CALAMITY IN THE REAL ESTATE MARKET. 90% OF ALL THE LOSSES WERE ATTRIBUTABLE TO REAL ESTATE WHETHER IT WAS IN THE FORM OF DERIVATIVES, OR CASH, OR CDOS, OR STRUCTURED INSTRUMENTS, IT WAS A REAL ESTATE BUBBLE THAT COLLAPSED. DOESN'T MEAN – I CAN UNDERSTAND THE – AND I AM SYMPATHETIC TO THE IDEA THAT CERTAIN INSTITUTIONS THAT GET CERTAIN BENEFITS IN TERMS OF BEING ABLE TO ACQUIRE CERTAIN KIND OF FINANCING ON A GUARANTEED BASIS SHOULDN'T DEPLOY THAT FOR STRICTLY PROPRIETARY PURPOSES. BUT THEY SHOULD BE ABLE TO BE PRINCIPALS BECAUSE MARKET MAKING IS A VERY IMPORTANT PUBLIC FUNCTION OF COMPANIES LIKE OURS AND IF WE DON'T DO THAT, THE DROP IN LIQUIDITY WILL NOT ALLOW OTHER PEOPLE IN INDUSTRIES AND OTHER INVESTORS TO ACCOMPLISH THEIR OBJECTIVE, WHICH ARE BENEFICIAL FOR THE FINANCIAL MARKETS.

FROST: IT'S SOMETHING YOU'D LIKE TO HAVE MORE FLEXIBILITY OF.

BLANKFEIN: SOMETHING SHOULD BE THAT MUCH MORE FLEXIBILITY.

FROST: IN TERMS OF THE POSSIBILITY OF RING FENCING COMING BACK, DO YOU THINK INVESTMENT BANKS AND COMMERCIAL BANKS SHOULD BE SEPARATED?

BLANKFEIN: YOU KNOW, I THINK THE EGGS ARE OUT OF THE SHELL AND AN OMELET HAS BEEN MADE. WE ARE PROBABLY – AND THIS HAS BEEN POINTED OUT – WE ARE PROBABLY THE LARGE BANK THAT'S BEST POSITIONED FOR A RETURN TO GLASS-STEAGALL BECAUSE WE'RE NOT A UNIVERSAL BANK. WE HAVE SOME OF THOSE FUNCTIONS, BUT VERY MINOR IN RELATION TO OUR INVESMENT BANKING ACTIVITIES. AND SO OUR ADAPTATION TO THAT WOULD BE RELATIVELY EASY. THAT SAID, WITH THAT KIND OF REMOTENESS AND THAT KIND OF PERSPECTIVE I COULD SAY IN 2017 IT'S REALLY HARD TO DIFFERENTIATE FUNCTIONALITY SUCH THAT ONE INSTITUTION COULD LEND MONEY AND COMPLETE A LOAN AND ANOTHER INSTITUTION COULD UNDERWRITE A BOND FOR THE COMPANY WHICH MAY BE THE ECONOMIC EQUIVALENT, BUT THAT'S A SECURITY.

FROST: RIGHT.

BLANKFEIN: AND SO I THINK THOSE ISSUES HAVE – I THINK THE WORLD HAS MOVED ON. AND BY THE WAY, ALL FINANCIAL INSTITUTIONS AROUND THE WORLD HAVE DROPPED THAT DICHOTOMY. SO THE U.S. WOULD BE A KIND OF ISLAND IN THE WORLD AND I DON'T THINK IT MAKE AS MUCH SENSE NOW, BUT I COULD UNDERSTAND AND AM SYMPATHETIC TO THE IDEA THAT CERTAIN OF THE FUNCTIONALITY RELATED TO SECURITY HAS CREATED DIFFERENT SET OF RISKS THAN TRADITIONAL LENDING. BY THE WAY,TRADITIONAL LENDING IS OFTEN THE RISKSIER ACTIVITY. WHEN YOU GIVE MONEY TO YOUR CLIENTS AS WE DO, YOU SIT THERE AND YOU HOPE THEY PAY YOU BACK. WHEN YOU HAVE A SECURITY ON YOUR BOOK AND YOU GET NERVOUS ABOUT THE CREDIT UNDERLYING THAT SECURITY, YOU COULD SELL THAT SECURITY IN THE MARKET AND LIQUIFY YOUR POSITION. SO IT'S KIND OF IRONIC THAT AND IN THE CRISIS IT WAS THE KIND OF BANK-LIKE ACTIVITY, NOT THE SECURITY ACTIVITY, THAT GENERATED MOST OF THE LOSSES.

FROST: WANT TO MOVE ON TO YOUR Q1 EARNINGS. BIG MISS IN TRADING. WHAT WAS THAT DOWN TO?

BLANKFEIN: BIG MISS IN TRADING. CAME DOWN TO A COUPLE OF BUSINESSES, MAINLY OUR COMMODITY BUSINESS AND OUR CURRENCY BUSINESS. BUT WE'RE LOOKING AT ALL THOSE BUSINESSES. AND THE QUARTER BEFORE WE OUTPERFORMED IN OUR TRADING BUSINESSES. THIS QUARTER WE UNDERPERFORMED. AND GUESS WHAT? I'M HAPPY TO REPORT THAT WE'RE HUMAN.

FROST: EVERYONE ELSE, THOUGH, THIS QUARTER IN THE U.S. BANKS OUTPERFORMED. SO IT WASN'T A VOLUME THING. IT WAS A POSITIONAL THING THAT YOU GOT WRONG?

BLANKFEIN: YOU KNOW, WHEN YOU LOOK AT IT, YOU KNOW, THE EVIDENCE THAT WE HAVE IS THAT WE UNDERPERFORMED IN A MARKET IN WHICH OTHER PEOPLE PERFORM BETTER. NOW SOME OF THAT IS ATTRIBUTED TO BUSINESS MIX, OUR CLIENT MIX IS A LITTLE BIT DIFFERENT. WE TEND TO DEAL WITH MORE COMING FROM OUR INVESTMENT BANKING SECURITY ROOTS. WE TEND TO DEAL WITH MORE MONEY MANAGERS AND ASSETS MANAGERS TEND TO BE A HIGHER PROPORTION OF OUR BASE. HEDGE FUNDS, WE KNOW THAT THERE'S SOME STRESS AND DISTRESS IN THAT COMMUNITY. WE TEND NOT TO HAVE CORPORATE MONEY MANAGEMENT SERVICES, WE TEND TO HAVE – WE TEND TO PERFORM FEWER SERVICES FOR CASH MANAGEMENT. SO OUR RELATIONSHIP TO CORPORATES TENDS TO BE A LITTLE BIT LESS. THAT'S SOMETHING THAT HAD DONE VERY, VERY WELL DURING THAT BECAUSE CORPORATE BALANCE SHEETS ARE A WASH AND LIQUIDITY. THAT LIQUIDITY GETS INVESTED. SO THERE'S A BIT OF DIFFERENCE IN OUR FOOTPRINT. BUT YOU KNOW SOMETHING, IT BEHOOVES US TO EVEN OUT THAT FOOTPRINT AND DEAL WITH A – AND WIDEN OUT OUR INVESTOR AND CLIENT BASE. YOU KNOW, WE'LL ADDRESS THESE ISSUES, WE ALWAYS HAVE.

FROST: I WANT TO MOVE ON AND TALK A BIT ABOUT GARY COHN, IF I MAY.

BLANKFEIN: SURE.

FROST: WHEN HE WAS YOUR NUMBER TWO, DID HE CHALLENGE YOU REGULARLY AND DO YOU THINK HE'LL BE DOING THAT NOW TO PRESIDENT TRUMP?

BLANKFEIN: I COULD CONFIRM TO YOU THAT IT IS A CORE OF GARY'S PERSONALITY, WHICH I'VE WITNESSED FOR 27 OF THE 27 YEARS OUR CAREERS OVERLAPPED, THAT HE'S A CHALLENGING PERSON, ALL TERRIFIC. HE HAS GREAT IDEAS. HE'S THE PERSON IN MY LIFE WHO SAID THINGS THAT I'VE THOUGHT TO MYSELF, GEE I WISH I'D THOUGHT OF THAT.

FROST: RIGHT.

BLANKFEIN: HE'S VERY GOOD AND I KNOW I COULD JUST—I'M NOT THAT IN TOUCH, BUT I CAN SEE THE RELATIONSHIP THAT HE HAS WITH THE PRESIDENT. I CAN TELL THAT THE PRESIDENT IS RIGHT IN BESTOWING TRUST ON HIM.

FROST: HAVE YOU SPOKEN TO GARY SINCE HE LEFT?

BLANKFEIN: I HAVE.

FROST: HOW MANY TIMES.

BLANKFEIN: NOT A LOT.

FROST: SO YOU DON'T HAVE REGULAR CONTACT WITH HIM OR MANY OF THE OTHER GOLDMAN ALUMNI IN THE ADMINISTRATION?

BLANKFEIN: NO. NO.

FROST: WELL, WHAT IS YOUR VIEW ON THE FACT THAT SO MANY HAVE – STEVE MNUCHIN, DINA POWELL AS WELL – HAVE ENDED UP IN THE ADMINISTRATION?

BLANKFEIN: WELL, FIRST MY BLINK REACTION IS A SENSE OF PRIDE THAT, AGAIN, ANOTHER PERSON WHO WASN'T NECESSARILY FRIENDLY TO OUR INSTITUTION IN HIS CAMPAIGN RECOGNIZED THE TALENT OF THESE PEOPLE. I DON'T THINK HE WAS GOING OUT OF HIS WAY TO HIRE GOLDMAN SACHS ALUMNI AND CURRENT EMPLOYEES. I THINK HE WAS LOOKING FOR GOOD PEOPLE AND GUESS WHAT, DISPROPORTIONATELY, HE FOUND THEM AT OUR FIRM AND IN OUR ALUMNI BASE. SO I FEEL PRIDE AT THAT. IT GENERATES A LOT OF INCONVENIENCE FOR US BECAUSE LOOK AT THE QUESTIONS YOU ARE ASKING ME. EVERYONE – WE ARE UNDULLY, I THINK, APPREHENSIVE. YOU LOOK, IN THE ORDINARY COURSE OF MY LIFE, IS WE'RE AN UNDERWRITER OF DEBT, WE'RE A VERY IMPORTANT AND INFLUENTIAL FINANCIAL INSTITUTION. I WOULD NORMALLY BE REGULARLY ENGAGED WITH THE PRINCIPLE ECONOMIC ADVISERS AND MAYBE THE TREASURY SECRETARY AND IN THE ADMINISTRATION. LITTLE APPREHENSIVE ABOUT IT BECAUSE FOR FEAR OF HOW IT MIGHT LOOK. IT CREATES ISSUES FOR US THAT OTHERWISE WOULDN'T BE THERE. SO IN THE ONE CASE, I'M PROUD. IN THE OTHER CASE, IT CREATES SOME INCONVENIENCE TO US BECAUSE IT BECOMES A MATTER OF NEWS, HOW MANY TIMES – NOBODY'S ASKED ME HOW MANY TIMES I TALK TO JACK LEW. AND BY THE WAY, I TALK TO HIM FREQUENTLY.

FROST: WE'VE HAD A LOT OF CHALLENGES AROUND THE REST OF THE WORLD, PARTICULARLY IN EUROPE OVER THE LAST COUPLE OF YEARS. SOME ELECTIONS HAVE GONE WELL FOR MARKETS, OTHERS HAVEN'T. THERE'S STILL SOME TO COME. WHEN YOU LOOK AT THAT AND THE CHALLENGES PLACES LIKE EUROPE AND ASIA FACE, DO YOU EVER PAUSE AND THINK GOSH, I'M REALLY PLEASED THAT THE COMPANY I RUN AND MANAGE IS BASED MAINLY IN THE UNITED STATES AND HEADQUARTERED HERE AND THE LEGAL AND CONSTITUTIONAL PROTECTION YOU HAVE IN THE UNITED STATES?

BLANKFEIN: LOOK, WE'RE AN AMERICAN-ORIGINATED FIRM AND AN AMERICAN-BASED FIRM. BUT OUR BUSINESSES DISTRIBUTED AROUND THE WORLD, OUR INVESTORS, OUR SHAREHOLDERS DISTRIBUTED AROUND THE WORLD. OUR EMPLOYEES – IF YOU WALK THROUGH THE NEW YORK TRADING ROOM, IT'S A UNITED NATIONS. BUT WE HAVE TRADING ROOMS ALL AROUND THE WORLD. SO, WE'RE REALLY A GLOBAL FIRM. CERTAINLY THE U.S. IS – THERE WAS A HUGE ADVANTAGE BEING BASED IN THE U.S. IT HAS A BIG BALANCE SHEET. SO, TO THE EXTENT THE BANKS WERE IN DISTRESS, NOBODY THOUGHT IT WAS GOING TO BLOW UP THE BALANCE SHEET OF THE UNITED STATES. THAT WAS NEVER AN ISSUE. IT WAS ALWAYS THE WILLINGNESS OF THE UNITED STATES AND WHAT THEY'D BE WILLING TO DO, NOT WHAT THEY HAD THE CAPACITY TO DO AS IT WAS IN OTHER PLACES. AND IN GENERAL, THE TONE AND THE NATURE OF THE UNITED STATES AND THE CULTURE OF THE COUNTRY IS TO GET ON WITH THINGS AND DO THINGS QUICKLY. LOOK, YOU KNOW, IT WAS PRETTY STRESSFUL FOR US DEALING IN THE AFTERMATH OF THE FINANCIAL CRISIS. BUT THE UNITED STATES DEALT WITH THAT AGGRESSIVELY. FIRMS WERE RECAPITALIZED. I COULD BE CRTICIAL OF SOME ASPECTS AND SOME EXCESSES OF THE REGULATION AND THE LEGISLATION, BUT LARGELY, THEY WERE GOOD AND NECESSARY AND THEY WERE DONE RIGHT AWAY. SO, WE GOT ON WITH THINGS. SO, THE FIRM – REGULATION WAS DONE, WE WERE ABLE TO ADJUST TO IT QUICKLY. FIRMS ARE RECAPITALIZED. WE ARE VERY WELL OFF. THE U.S. FIRMS ARE VERY WELL CAPITALIZED. SOME OF THE FIRMS IN EUROPE ARE A HALF A CYCLE BEHIND AND ARE JUST RECAPITALIZING NOW. AND SO, I HAVE TO GIVE CREDIT TO THE OFFICIAL SECTOR IN THE U.S. FOR ACCOMPLISHING THAT OBJECTIVE VERY, VERY EARLY IN THE PROCESS. IT LOOKED CRAZY TO A LOT OF PEOPLE WHO WERE WATCHING FROM OVERSEAS, BUT GUESS WHAT? THE U.S. GOT IT DONE.

FROST: LLOYD, I WANTED TO ASK YOU, BEFORE WE WRAP UP, ABOUT YOUR HEALTH, IF I MAY.

BLANKFEIN: OH, SURE.

FROST: 2015 YOU HAD LYMPHOMA. ARE YOU BACK TO FULL HEALTH? BACK TO YOUR BEST, YOU THINK?

BLANKFEIN: I FEEL PRETTY GOOD. I HAVE TO PLOT IT AGAINST THE DECLINE I GET FROM JUST GETTING OLDER THAN I WAS WHEN I FIRST GOT SICK. I THINK I'M OKAY. I HAVE VERY SLIGHT RESIDUAL THAT REMINDS ME FROM TIME TO TIME. SOME NUMBNESS HERE AND THERE. AND THEN OF COURSE, THERE'S A LITTLE BIT – I'M USED TO – I'M IN THE RISK BUSINESS. SO I'D SAY THERE'S SOME – A LITTLE BIT OF OVERHANG. YOU WORRY ABOUT THINGS COMING BACK. BUT STATISTICLY, I'M CURED. I FEEL PRETTY GOOD. AND I DON'T THINK ABOUT IT UNLESS – EXCEPT AND UNTIL I GET ASKED THE QUESTION. SO THANK YOU FOR THAT.

FROST: WELL, I APOLOGIZE FOR BRINGING IT UP.

BLANKFEIN: NO, NO, NO.

FROST: BUT I'M DELIGHTED AT SUCH AN UPBEAT RESPONSE. WE ALL ARE.

BLANKFEIN: IT'S FAIR GAME. IT'S FAIR GAME. AND YOU'RE TERRIFIC FOR COMING HERE TO OUR CONFERENCE.

FROST: WELL, IT'S BEEN A PLEASURE TO BE HERE FOR YOUR CONFERENCE. AND TO ROUND THAT OFF, I MEAN, YOU'VE BEEN CEO FOR 11 YEARS. DO YOU FEEL LIKE YOU GET BETTER EVERY SINGLE YEAR FROM THE EXPERIENCE AND ANOTHER DECADE TO COME?

BLANKFEIN: WELL, I FEEL I GET OLDER. NO, I FEEL – OBVIOUSLY YOU FEEL COMFORTABLE. I'M NOT SURE WHETHER COMFORT IS GOOD OR BAD BECAUSE I THINK IN THE FRESHNESS AND NEWNESS, YOU HAVE DIFFERENT PERSPECTIVES. I THINK THERE IS VALUE TO EXPERIENCE. I'VE SEEN A LOT OF STUFF. AND THERE'S ALSO VALUE TO NERVOUS ENERGY. AND THE FRESHNESS AND NEWNESS THAT ONE BRINGS AND ONE HAS TO WEIGH THOSE THINGS AGAINST EACH OTHER. SO I WOULDN'T SAY – I'D SAY IT'S GREAT THAT I'M ABOUT TO START MY 12th YEAR BECAUSE I STARTED BASICALLY, I GOT THE CALL FROM HANK THAT HE WAS GOING INTO THE GOVERNMENT MEMORIAL DAY WEEKEND IN 2006. AS I GET READY FOR MY START OF MY 12th YEAR, I THINK THERE'S VIRTUE TO MY LONG TENURE AND ONE WOULD HAVE TO SAY THAT IT'S NOT ENTIRELY VIRTUOUS. BUT I FEEL GOOD AND I CERTAINLY HAVE MY ENERGY ABOUT ME.

FROST: AND YOU MENTIONED THAT GARY USED TO CHALLENGE YOU A LOT AND THINK OF THINGS THAT YOU DIDN'T THINK OF. DOES GOLDMAN SACHS MISS GARY COHN?

BLANKFEIN: OH SURE. AND WE HAVE OTHER PEOPLE WHO ARE ALSO TERRIFIC WHO AREN'T GARY AND GARY IS NOT THEM. AND GARY WASN'T ME AND I WASN'T GARY. SO I WOULD TELL YOU HE'S TERRIFIC. THERE WERE THINGS THAT GARY DID THAT GOT – EVERYBODY WISHES HE WAS STILL THERE DOING. BUT THE GUYS WHO HAVE STEPPED UP INTO HIS JOB WOULDN'T HAVE BEEN THERE TO DO IT IF GARY WAS IN THAT SEAT. SO, LIFE MOVES ON. IT'S A LONG GRAY LINE. MY PREDECESSORS, I'M SURE, WERE WRINGING THEIR HANDS AND SAYING, "WHAT'S GOING TO HAPPEN TO GOLDMAN SACHS WITH THIS GUY LLOYD BLANKFEIN IN THERE?" I'VE LEARNED THE LESSONS OF HISTORY. I'M CERTAINLY NOT THINKING THAT WITH RESPECT TO THE PEOPLE WHO ARE GOING TO BE AROUND AS MY SUCCESSORS.

FROST: LLOYD, IT'S BEEN A PLEASURE SPEAKING WITH YOU TODAY. THANK YOU VERY MUCH FOR HAVING US.

BLANKFEIN: IT'S MY PLEASURE, WILF. AND YOU'RE DOING A GREAT JOB. GOOD TO SEE YOU.

FROST: YOU'RE TOO KIND. LLOYD BLANKFEIN, THE CHAIRMAN AND CEO OF GOLDMAN SACHS. SEND IT BACK TO HEADQUARTERS.

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