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CNBC TRANSCRIPT: CNBC'S DAVID FABER SPEAKS ONE-ON-ONE WITH GOLDMAN SACHS CHAIRMAN & CEO LLOYD BLANKFEIN, TODAY, TUESDAY, APRIL 27TH

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WHEN: Today, Tuesday, April 27th at 10PM ET

WHERE: CNBC's "The Case Against Goldman Sachs"

Following is the unofficial transcript of a CNBC interview with Lloyd Blankfein, Goldman Sachs Chairman & CEO, today, Tuesday, April 27th on CNBC's "The Case Against Goldman Sachs."

All references must be sourced to CNBC.

DAVID FABER: I'M HERE WITH CHAIRMAN AND CEO OF GOLDMAN SACHS LLOYD BLANKFEIN WHO HAS CONCLUDED A VERY LONG DAY OF TESTIMONY IN FRONT OF CARL LEVIN'S PANEL. THANKS OF COURSE FOR BEING WITH US AT THIS LATE HOUR. A LOT OF DIFFERENT THINGS SAID TODAY, A LOT OF DIFFERENT ANALOGIES USED, OCCASIONALLY TO THAT OF A CASINO WHEN REFERRING TO THE SYNTHETIC CDO MARKET. I'D LIKE YOU TO COMMENT ON ANOTHER ONE THAT CAME UP A GREAT DEAL WITH SENATOR CLAIRE McCASKILL WHO REFERRED TO THE ABACUS TRANSACTION AND GOLDMAN'S ROLE IN IT AS NOTHING MORE THAN A BOOKIE. DO YOU BUY THAT?

LLOYD BLANKFEIN: WELL, I DON'T THINK THAT'S RIGHT. SYNTHETIC CDOs ALLOWED BUYERS AND SELLERS TO BE ABLE TO TAKE THE KINDS OF POSITIONS THEY WANT IN THE HOUSING MARKET. IT WASN'T A CASINO AND ALSO THESE WERE VERY, VERY HIGHLY SOPHISTICATED PARTIES. IN FACT, AMONG THE MOST SOPHISTICATED IN THE WORLD IN A PROFESSIONAL MARKET.

FABER: SOMEONE ASKED THE QUESTION, WHY DO WE EVEN NEED THE SYNTHETIC CDO MARKET? WE'RE TALKING A DERIVATIVE OF A DERIVATIVE OF A DERIVATIVE. WE HAVE A 12 TRILLION DOLLAR PHYSICAL MORTGAGE MARKET THAT ALREADY EXISTS DURING THIS PERIOD IN TIME. WHY SYNTHETIC CDOs?

BLANKFEIN: I THINK WHAT SYNTHETIC CDOs ALLOWED PEOPLE TO DO WAS TO EFFICIENTLY AND QUICKLY GET THE KIND OF DIVERSIFICATION AND RISK THEY WANTED ON THE BUY SIDE OR ON THE SELL SIDE AND THERE WERE HEDGERS AND MARKET PARTICIPANTS THAT DID THIS. I THINK ISSUES WERE RAISED AND I THINK IN CONNECTION WITH REGULATORY REFORM , I THINK PEOPLE WILL BE LOOKING AT THE DERIVATIVES MARKET AND TO SEE THAT NOTWITHSTANDING THE VALUE THEY CONTRIBUTE TO THE MARKET ARE SOME SECURITIES TOO COMPLEX AND HARD TO MANAGE.

FABER: AND WHAT DO YOU THINK AT THIS POINT WHEN YOU LOOK BACK ON THE SYNTHETIC CDO MARKET? DO YOU THINK PERHAPS IT'S SOMETHING, YOU KNOW WHAT, I WISH WE HADN'T TOUCHED IT? I WISH WE HADN'T DONE IT?

BLANKFEIN: I UNDERSTAND FULLY THE REASON THAT DROVE THE TRANSACTIONS AND I THINK IT COULD BE WELL --

FABER: WELL WHAT WAS THE REASON THAT DROVE THE TRANSACTIONS?

BLANKFEIN: WITH RESPECT TO THE PEOPLE WANTED POSITIVE OR NEGATIVE RISK TO THE HOUSING MARKET.

FABER: RIGHT. AND YOU KNOW, PEOPLE WERE SEARCHING FOR YIELD. BUT I WONDER, COULDN'T THEY HAVE FOUND IT IN SOME OTHER AREA IF YOU DEMAND ON THE -- I WANT MORE YIELD SIDE? COULD YOU HAVE SATISFIED THAT IN A WAY? OR EVEN IF PEOPLE WERE OUT THERE, BUYING CDS AND RNBS, IT DIDN'T NECESSARILY MEAN THAT YOU HAD TO END UP HAVING IT IN A SYNTHETIC CDO, DID IT?

BLANKFEIN: THESE WERE PROFESSIONAL INVESTORS WHO SOUGHT THE RISK AND OBTAINED THE RISK THAT THEY WANTED IN THE MARKET.

FABER: IT CAME UP A LOT TODAY, A QUESTION TO A NUMBER OF PEOPLE, NAMELY, IF YOU HAVE AN ADVERSE INTEREST TO YOUR CLIENT, DO YOU HAVE A RESPONSIBILITY TO TELL THEM?

BLANKFEIN: I THINK WHEN YOU ARE A MARKET MAKER, YOU HAVE A RESPONSIBILITY TO MAKE SURE YOUR CLIENT IS SUITABLE , IS KNOWLEDGEABLE, AND THAT WHAT YOU ARE PROVIDING, SERVES THE PURPOSE AND PROVIDES THE RISK THE CLIENT WANTS.

FABER: AND DO YOU BELIEVE GOLDMAN SACHS DID THAT? AND ALL OF ITS DAILY SYNTHETIC CDO MARKET?

BLANKFEIN: YES. I BELIEVE WE DID.

FABER: LARGER QUESTION COMES UP, OF COURSE, SO MUCH OF THIS, NOT ABOUT THE S.E.C. CASE, WHEN MANY PEOPLE HAVE QUESTIONS, FRANKLY, ABOUT THE STRENGTH OF THE CASE. BUT THE LARGER QUESTIONS ABOUT ETHICS, ABOUT THIS MARKET AND THIS PERIOD OF TIME AND HOW IT REFLECTS ON GOLDMAN AND, FRANKLY, ALL OF WALL STREET, WHY DID IT NEED TO EXIST? WHY DID IT NEED TO HAPPEN? AT WHAT POINT DO YOU IN SENSE LOSE CLIENTS OR LOSE THE TRUST OF CLIENTS AS A RESULT OF WHEN THEY LOOK BACK AT THIS PERIOD IN TIME?

BLANKFEIN: I THINK THE HOUSING MARKET WAS AND IS AND WILL BE AN IMPORTANT MARKET AND IT WILL WANT TO ATTRACT CAPITAL. IN ORDER TO ATTRACT CAPITAL, PEOPLE HAVE TO HAVE INVESTMENT OPPORTUNITIES AND PEOPLE WILL ALSO NEED INSTRUMENTS THAT WILL ALLOW THEM TO HEDGE THEIR INVESTMENTS OR ELSE CAPITAL WON'T FLOW IN.

FABER: EARLIER TODAY, FOUR EXECUTIVES, ALL OF WHOM HAD WORKED AT ONE POINT IN YOUR SECURE TIES MORTGAGE MARKET AND AREA WERE ASKED WHETHER THEY BARE ANY RESPONSIBILITY WHATSOEVER FOR THE FINANCIAL CRISIS IN TERMS OF THE WORK THEY DID AT GOLDMAN SACHS. ALL OF THEM TO A MAN SAID NO. DOES THAT SURPRISE YOU?

BLANKFEIN: I THINK THAT WAS A DIFFICULT QUESTION FOR TRADERS WHO WORK ON DESKS, WHO RESPONDED TO CLIENT INQUIERIES TO ANSWER. I THINK YOU HAD A SLIGHTLY DIFFERENT ANSWER FROM MORE SENIOR PEOPLE LIKE DAVID VINIAR AND MYSELF.

FABER: RIGHT. AND YOU BELIEVE THERE IS SOME RESPONSIBILITY.

BLANKFEIN: I THINK THE FINANCIAL INSTITUTIONS LET THE PUBLIC DOWN AND WE ARE VERY IMPORTANT INFLUENTIAL FINANCIAL INSTITUTION AND SO WE BEAR OUR SHARE.

FABER: YOU KNOW, ANOTHER QUESTION WAS, DO YOU HAVE A DUTY TO ACT IN THE BEST INTERESTS OF YOUR CLIENTS? AND AGAIN, THERE WAS A LOT OF HESITATION ON THE PART OF THOSE FOUR EXECUTIVES. I ASK YOU. DO YOU HAVE A DUTY TO ACT IN THE BEST INTERESTS OF YOUR CLIENTS?

BLANKFEIN: YES, OF COURSE, WE ACT IN THE BEST INTERESTS OF OUR CLIENT IN MAKING LIQUID MARKETS AND THE RISK THEY WANT TO BE ABLE TO TRANSACT --

FABER: I'VE TALKED TO CEOs OF COMPANIES THAT LOVE DOING BUSINESS WITH YOU. LOVE TO GET MNA ADVICE WITH YOU. BUT IF YOU SAY KNOWINGLY, I KNOW SOMEBODY AT GOLDMAN IS PROBABLY SHORTING MY STOCK RIGHT NOW. I KNOW THE PRIVATE EQUITY PART OF GOLDMAN SACHS MAY BE COMPETING WITH ME TO BUY A BUSINESS. HOW DO YOU PUT ALL OF THOSE DIFFERENT CONFLICTS IN PLACE AND STILL SERVE YOUR CLIENTS INTEREST?

BLANKFEIN: I THINK WE'VE BEEN SERVING CLIENTS FOR 140 YEARS AT GOLDMAN SACHS AND AT THE TOP OF THE LISTS FOR CLIENT ORIENTED FIRM THAT GETS VALIDATED BY THE RESPONSE OF OUR CLIENTS. IN FACT, OUR CLIENTS HAVE BEEN VERY, VERY LOYAL TO US AND ARE VERY, VERY IMPORTANT TO US. WITHOUT OUR CLIENTS WE HAVE NOTHING AND WE ACT THAT WAY TO OUR CLIENTS. AND WE ARE VERY, VERY GRATEFUL FOR THEIR SUPPORT.

FABER: AND OF COURSE THAT CONTINUES. I WONDER DO YOU CONTINUE TO GET THAT SUPPORT FROM YOUR CLIENTS DURING THIS VERY DIFFICULT PERIOD? HAVE YOU SEEN ANY EROSION IN YOUR CLIENT BASE SINCE THE S.E.C. COMPLAINT?

BLANKFEIN: OUR CLIENTS HAVE BEEN VERY SUPPORTIVE TO US BECAUSE WE PROVIDED THEM WITH THE SERVICE THEY'VE ASKED FOR ALL THESE YEARS.

FABER: AND YOU'RE NOT SEEING ANY REAL DIMINISHING AMONGST CLIENTS? THERE HAS TO BE A CONCERN.

BLANKFEIN: OF COURSE WE'RE CONCERNED. LOOK, WE HAVE GONE THROUGH, LOOK THE COUNTRY HAS GONE THROUGH A STRESSFUL PERIOD. AND GOLDMAN SACHS HAS GONE THROUGH A STRESSFUL PERIOD AS WELL. WE ARE STAYING IN CLOSE COMMUNICATION AND BEING VERY OPEN WITH OUR CLIENTS DURING THIS PERIOD.

FABER: HOW ABOUT YOU? DO YOU BELIEVE YOU HAVE THE SUPPORT OF YOUR BOARD OF DIRECTORS?

BLANKFEIN: I BELIEVE I HAVE THE SUPPORT.

FABER: FINAL QUESTION TO YOU LLOYD. YOU'VE SAID IN THE PAST, AND I BELIEVE YOU WERE BEING SARCASTIC WHEN YOU SAID IT, THAT WHAT IS GOOD FOR GOLDMAN SACHS, IS GOOD FOR AMERICA. DO YOU STILL BELIEVE THAT?

BLANKFEIN: I'M NOT SURE I SAID THAT. BUT I WILL SAY THAT GOLDMAN SACHS'S INTERESTS ARE BEST SERVED BY A STRONG ECONOMY. MOST OF THE ACTIVITIES THAT WE DO CORRELATE WITH GROWTH, AND STRENGTH IN THE ECONOMY. AND IF THE ECONOMY DOESN'T GROW, IT'S BAD FOR GOLDMAN SACHS.

FABER: STRENGTH FROM THE ECONOMY. AGAIN, BACK TO THE POINT IN THAT ROOM OVER AND OVER AGAIN WAS THIS IDEA THAT IT WAS UNCONNECTED TO THE SOCIAL GOOD, TO THE BROADER GOOD OF THE AMERICAN ECONOMY. BECAUSE IN EFFECT, WALL STREET HAS MOVED SO FAR OUT ON THE CURVE IN TERMS OF RISK, THAT IT'S NOT DOING THINGS THAT MOVE CAPITAL TO WHERE IT'S NEEDED. BUT SIMPLY MAKE BETS ON TWO SIDES ABOUT A TRANSACTION THAT DOES NOTHING FOR THE BROADER ECONOMY.

BLANKFEIN: ALL OF OUR ACTIVITIES, CORRELATE AND LEAD TO GROWTH IN THE ECONOMY, AND BENEFIT FROM GROWTH IN THE ECONOMY. WE HELP MANAGE PEOPLE'S MONEY. PEOPLE MOVE TO RISKIER ASSETS WHEN THEY ARE CONFIDENT. PEOPLE TRY TO FINANCE AND EXPAND THEIR BUSINESS WHEN THEY ARE FEELING GOOD. ALL OF THESE ACTIVITIES, CORRELATE WITH THE SUCCESS OF THE ECONOMY AND THEREFORE THE SUCCESS OF THE ECONOMY IN THE SENSE OF GOLDMAN, FRANKLY, ARE TIED TOGETHER.

FABER: MR.. BLANKFEIN, THANK YOU.

BLANKFEIN: THANK YOU VERY MUCH DAVID.

FABER: LLOYD BLANKFEIN, CHAIRMAN AND CEO OF GOLDMAN SACHS.

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