Speaking to the Economic Club of Washington D.C., Goldman Sachs Chairman and CEO Lloyd Blankfein pointed to the uncertainty in the nation's capital as a major drag on the world economy.
Specifically, Blankfein said lawmakers inability to reach a near term compromise on the so-called "fiscal cliff" is destroying wealth and hurting businesses. The fiscal cliff is the dual whammy of the expiration of the Bush tax cuts and automatic spending cuts that take effect next year if there is no budget agreement.
"The fiscal cliff has a major uncertainty on the world," Blankfein said in a wide ranging interview conducted by the Carlyle Group's co-CEO and co-founder David Rubenstein. "(It) is responsible for a real burden and a real dimunition of value and wealth in the world just because uncertainty makes everything worth less."
Blankfein said uncertainty about the fiscal cliff and about the future of the euro zoneis impacting Goldman's clients and the investment bank's business. On Tuesday, the firm reported its second quarter profits fell 11 percent from last year's second quarter.
Blankfein suggested Washington could do its part to ease the uncertainty by engaging in something broadly absent in the city these days — compromise.
"Any kind of stability in our system can only be achieved if everyone throws in at least a little so that its stable," he said. "One of the things that I think is lunatic is the idea of backing yourself into a corner and saying I cannot compromise on this."
Blankfein declined to give a direct answer as to whether he would like to see the tax cutsextended or allowed to expire. He said he would just like to see a decision made one way or another so that people and businesses would have a clearer idea of the future.
Appearing relaxed and showing flashes of humor, Blankfein said he is optimistic about the future of the U.S. economy because "statistically" things tend to get better. He said he does not see the U.S falling into a recession.
When asked where he would invest, Blankfein said for long term investors, emerging market or growth economies provided a better opportunity for investors.
"This is the century of the BRICs," he said, referring to the acronym for the developing economies of Brazil, Russia, India and China.
On the growing Libor scandal, where a number of Goldman's rivals, but not Goldman , are being investigated for manipulating the key London Interbank Offered Rate, Blankfein said it is another blow to the integrity of, and trust in the financial industry.
Blankfein repeated that while he is worried the euro might break up, he feels it will survive. He also acknowledged its a flawed system that needs to be adjusted.
Asked about the U.S regulatory system, Blankfein said he would not get rid of Dodd-Frank and that he thinks some parts of it are good. He said some parts of the law will go to far but will likely be adjusted. One part he does not like is the Volcker rule, which seeks to end proprietary trading at the big banks. Blankfien said he was "not happy" with that rule.
When asked about his legacy and what it would like it to be Blankfein gave a rambling answer about doing well for clients, leading the firm through a tough time but having it emerge as being stronger. He also added he would like to improve his firm's reputation and public image. An image hurt by the company's lack of public outreach. Something the firm is now trying to change.
— By CNBC's Mary Thompson