Talk of "green shoots" abounds with the S&P 500 up 40% from its lows in March 2009, but Goldman Sachs (NYSE: GS) CEO Lloyd Blankfein remains cautious in his outlook for the global economy. "I think it's going to be a long, protracted recession," he said while speaking on a panel at the annual International Organization of Securities Commissions (IOSCO) conference in Tel Aviv.
Blankfein also emphasized the importance of intelligent regulation and risk management, warning fellow finance executives not to discount the latter. "The culture of risk management is very important and hard to legislate, but at the end of the day, you have to make sure that the people on the risk management side of your operation are just as capable, and maybe therefore, just as well-paid and have the career opportunities as people on the producing side of the business."
Goldman Sachs was all but forced to convert to a bank holding company following the collapse of Lehman Brothers, a status that allowed the firm to solidify its liquidity position by having access to Federal Reserve borrowing facilities. Even so, the firm has emerged relatively unscathed from a crisis that claimed rivals Bear Stearns and Lehman.
On Tuesday, Goldman was one of ten large financial institutions approved by the U.S. Treasury to repay capital received from the Troubled Asset Relief Program (TARP), from which the company had received $10 billion. The move came following a number of capital raising initiatives at the firm, which was deemed not to need additional capital from the Treasury's stress tests.
Following its earnings release in April, Goldman sold $5 billion in common stock; it has also sold a stake in Industrial & Commercial Bank of for $1.9 billion and raised $2 billion in debt without an FDIC guarantee. During the height of uncertainty in the financial crisis last fall, Goldman also made headlines by securing a $5 billion investment in preferred stock from famous investor Warren Buffett, CEO of Berkshire Hathaway (NYSE: BRK.A), offering Buffett warrants for $5 billion in common stock, and raising $5 billion more through a public stock sale.
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