DealBook 2016: The Future of Banking

hi everybody it's my pleasure to introduce to you Lloyd Blankfein who has been with us now many times at this conference and we're thrilled to have you back and I should also say thrilled to see you in good health because you were going to be with us if you remember last year right and you were recovering so I ducted it but it wasn't worth it but we we are appreciative of you being here so much to talk about including of course the election so let me just start with this as you can imagine did you ever imagine there would be what some people are now describing as a trump rally a Trump rally that's what it's Ono in the market well I had two of them of course I imagine that he could win I thought of rally isn't people with with uh I thought the election was over I of course I imagine that he can win I didn't thought think it was a high probability but if you told me that he was gonna win I would have told you there would have been a rally in the equity markets you would have of course so all of the prognostications including by the way I think some of the analysts at Goldman Sachs who suggested that the world was going to come to an end and that the markets were gonna oh by the way a percent there was a chance that the walk world would come to an end in the new case we wouldn't have had the rally but well the way not because of him I would have thought that that it would have been such a jarring prospect right that it would have been a discombobulation of the market at first followed by people going out and looking what hit policies he's committed to and reorganizing the very asset and market friendly so if you look at the totality of the positions he staked out so spending on infrastructure military's little more you know fiscal spending even in excess of what Secretary Clinton was going to do and lower taxes potentially lighter regulation that's a combination now you know kind of a burden on free trade that goes the other way but if you netted it all out it was very supportive of asset prices very supportive equities providing you got through that jarring moment when you found out that he got the election and created that uncertainty now that jarring moment happened didn't think it would only last eight hours until the market opened the next morning but the night before the night that had happened it was occurring the Martley Dow is down futures are down the equivalent of eight hundred nine hundred points and by of course the market closed up the next day so that happens a little quicker than I thought but there's really no surprise his policies are market supportive now I'm not saying it's good or bad for the you know you'd have to draw a different set of conclusions depending on your attitude about everything else but just as far as asset prices in the market is concerned in the near term how can they not be supportive well that was my question to the extent that you want to prognosticate a little further out than these past 48 hours given that things have actually it depends on what kind of a you know president you know he is you know all I know is I know how I know a lot about at this point we all know a lot about Trump the campaigner now we have to find out about Trump who needs to get things done and and starts to think not about getting elected but what his legacy is going to be and you know assume he'll I Stan you go into that office and you think about your place in history and things change I don't know if you saw the report this after I'm willing to I'm I'm going to I'm going to I'm going to see how it goes before I join the you know you know before I you know you know become mournful before you become mournful oh I don't know if you saw the report this afternoon that apparently on the short list of people for treasury secretary is a peer of yours Jamie Dimon well terrific do you think that's realistic well I think he would look I mean it's certainly attractive aspects to that I mean think of a couple of tractor I mean he'd be a great he'd be a great Treasury secretary and he's been in he's been a terrific competitor and I'd say in that one movie can kill two birds with one stone let me turn it around so the pasta the possibilities are terrific oh if you got the call asking me whether Jamie should be Treasury secretary if you got the call to be Treasury secretary there have been others from Goldman Sachs who have gone into government before dozens and would you take the job no I don't know I wouldn't I I think people again look what I said a few minutes ago about your place in history and I said that's a tough you know you'd have to you have to weigh that I mean whatever else people have pronounced and said or thought when you have an opportunity to make that kind of an impact yeah you'd have to think quite seriously about it you know everything you'd have to know what your role would be in any relationship with your boss and all those things are important and what kind of license and latitude and what priorities your boss have which because then you'd have to deploy but gosh people who say look I'm familiar with a number of people who've accepted that job I know what they said before and I know what they said during the process and I know what they said when they were sworn in so I think that I knowing that as I do I think I think a lot of people you know would take that job and I you know of course people would consider it let me ask you about your views and personal relationship to the extent you have any with Donald Trump you ended up in an ad a negative ad dare I say that Donald Trump ran at the very end of the campaign did you know that was going to come no I didn't know I didn't and you thought what when you saw it well after after I got up off the floor I was thinking I was thinking that the you know I didn't take it you know it's I didn't take it that personally I didn't realize boy there was Janet I said I'm pretty good company Danna Yellen was it was was also near yeah and the voiceover and you know was about the power structure and I said gosh I didn't know is that powerful so I you know I just think you know here you know the campaign I just didn't take it look I've been in the press a lot from time to time that does not make my top thirty list of things that I would be concerned about let me ask you about two other former Goldman Heights that may actually get this job if Jamie or you don't take it Devin said I'm not taking the job okay Steve minuchin a former goldman sachs alum Steve Bannon by the way I don't know if he's good at what job he'll take in the administration he's also a goldman sachs alone what can you tell us about them well I never met Steve Bannon as far as I guess oh I don't know him Steve minuchin I did he when I was running the fixed-income division he reported he was a high flyers very smart guy he was a partner to young age did very well you know so he was a very senior guide a very young age at goldman sachs so he's a you know smart smart guy i mean i followed his career i know what he's done but i haven't been really engaged with him that much since then but i'll tell you you sure he stayed just as smart as he was when he worked at Goldman good answer for when you go visit him at Treasury oh let me oh now he's visiting him he's not visiting me well I just got demoted we'll see how this goes let me ask you about this headline this is in this is in Vox in the last 24 hours it says Donald Trump's administration is going to be a bonanza for bankers that this is ultimately going to be very very good for the financial sector that ultimately he may reverse what was dodd-frank that many of the regulations may come off and that much of what has happened over the last four and five years in terms of the regulatory environment is going to look very different twenty four months from now do you believe that look regulation is not going to be repealed there could be some modifications that could make sound wouldn't want regulation to be repealed in toto there's certain kind of duplicate you know a lot of the regular I go to re framework is have more capital key we could have regulated the amount of capital could regulate the type of activities could have regulated remedies of something did everything so if there was something that could have contributed to stability let's not choose let's do them all so there are certain things that have a kind of back bending effect and has you know repress activity it could be appropriate to go look at some of it you wouldn't want to repeal it in toto but I will tell you if you want to be good for bankers you you have policies that drive economic growth that will be good for bankers will be good for companies will be good for citizens and let me ask you this it just in terms of trying to understand what may or may not happen around dodd-frank one of the things that he did say on the campaign trail and I don't know if you think he will ultimately go through with is glass-steagall bring it back right you think that's real you know I don't think it's realistic because that you know that almonds been made and that toothpaste is out of the tube you pick your metaphor but banks are around the world or highly now glass-steagall separated investment banking from commercial banking lending you know at these at this stage you can lend to a bank or you can underwrite a corporate bond from a bank they're economically equivalent things and universal banks do everything and that's the way the markets evolved over the last 25 or more years the fact of the matter is we stayed pretty close to a much more pure investment bank than than the ones you would consider our competitors and we'd be the closest to a in fact very close to a historically glass-steagall compliant model so that would do very very little violence to our business strategy on our plans notwithstanding that I would say that the world has evolved since then and you really couldn't separate those activities because lending corporate bond trading they're kind of substitutes for each other they're kind of equivalents right where do you think the popular image of bankers is at this point and my household or in in well I would say look we you know I don't have to rely I don't have to speculate you know we you know part of what we do is we you know we try we try not to be tone deaf and we try to hear things and we listen closely and we go out and we search you know we ask people and I'd say you know it's not in his low ebb as it was in the heart of the financial crisis it's still you know it's still low ebb and to that extent we compete you know compete you know with a lot of other institutions Congress you know institutions and I think in some in some ways this election and other elections around the world is a reflection of the low lowest game in which a lot of institutions and businesses I and you know and within the context of businesses industries Pharma extraction industries that you know all these things do great things and are essential for society but they're gonna look you know they're kind of in a low state there's I would say bankers is you know very competitive for the lowest but we have a lot of company these days and you know we have to work on that we know that what was your reaction and I talked about this your reaction to Wells Fargo what happened there again we're in a different you know we're a whole separate business but you're by the way about to get into that I want to talk about your right to get to the resources I would say my reaction to Wells Fargo would have been but you might as well your Wells Fargo is it kind of sounds like an institution we're like we are as different from each other as any banks could be that are still among the biggest banks in the country but I have you know I don't I don't always know but of course you know when you're in that kind of spot line you have to make rapid decisions and they hole you get caught up in the whole vortex and you'll have a lot of respond it's sort of brought back you know I had you know you know stress you know stress you know stress syndrome you know it reminds you know we've all got people a lot of people go through the washer if you haven't gone through it yet you don't realize it but if you've been doing this stuff as long as I do you find yourself with challenges that you have to work you have to work your way through right I know the people I know the people that you know I know the senior-most people there and you know they're you know they're quite good people but people get no you find yourself in challenging sick challenging situations of very big companies and things happen right um you talked about you have now been at Goldman and in this position for the longest you have the longest running tenure in this role well no I have the longest tenure in a long time along got John Weinberg was there long in Sydney Weinberg ran Goldman Sachs for 39 years and I'm not going to be competitive what I wouldn't ask you you named some new partners yesterday yeah we did and one of the things is so interesting and I think that's happening across Wall Street but I think it's particularly true at Gould that was the other election that took place this week the other election um people are staying longer at these firms it used to be there's a culture question feels longer people are staying longer and it and you know used to be you you you'd work at a place like Goldman and maybe when you were 50 or something 55 you go off and go into government and go do something else and so there was an enormous had a turnover it still is it's ten so the question is whether you think that's changed and whether you think internal I don't have the numbers but it's pretty close I'd say the average tenure is a ten-year for Goldman Sachs partner is not longer than it was it's probably around between six and eight years people we can make partners anytime but a lot of people make partner in their you know in their late 30s or early forties some later somewhere you know some a bit earlier and so most of the time and people leave Goldman Sachs look at all the names of the people you're mentioning there's certainly time for another act and in fact I remember when I became a partner at Goldman said well there are always exceptions to this have another app because I've been a partner now for almost 30 year of partner almost 30 years but I remember when I became a partner I was taken aside by the managing partner the administrative partners that you know Lloyd they're just you know they're blah blah blah this is how you have to live your life and pay your taxes and do everything on the up and up and here's two other things set up a you know you have tech you Shepherd you should be philanthropic I set up a foundation and joying board charitable philanthropic boards and the other thing you should do is you should arrange your life so that if it went and they finally write a final retinol picture area about you and it's nine paragraphs long no more than two or three should be about Goldman you know you should have to have some balance in your life let me ask you about then something we didn't all take that advice as you can see because I write I see that yes um when you think about being a banker today young person being a banker could be argued that the quote best and brightest were going into banking for very long time there but a lot of money you can make a lot of money in the banking business and you can still make a lot of money in the bank business but you can't make as much money as you used to be able to make and you see people going into technology and to other places has it made it harder to attract talent what's happened in the last eight years you know I my guess is we're not look my guess is we're not seeing as many of the best in the industry for too long had everybody I think there was one year that I read some statistic that something like sixty percent of the graduating class of Yale was coming down to Wall Street that made really didn't make a lot of sense we're getting fantastic people the ratio I think we have something like we we hire thousands of people every year I think we take less than fewer than 2% of the applicants and by any statistical measure it's a better class it's better higher grades whatever and Goldman in particular if we give an offer to someone and they get offers to someone else we have over in eighty percent yield that's not Harvard doesn't have that the same yield when they get when people get into more than one college so you know we do pretty well but you don't hear the phone that doesn't ring and so are there more people that are um that are going straight to Silicon Valley yes and probably good because first of all if they're not committed to Wall Street what happened is for a long time it's still to this day where there are people who come to us because they wanted to you know they were they're committed to finance even though they may change their mind later and there's a lot of people come in because they want the validation or the imprimatur of two years at a clerkship at goldman sachs because you learn a lot of transferable skills that help you in other things and it's good network and you know it's cetera and you know if we had few people apply to us and take a two-year job who had no intention of staying in the industry that would that's not so bad for us what do you make of a hedge fund business I mentioned to virtually everybody on the set this morning that we were going to ord this afternoon that we're going to be seeing Bill Ackman surely it has been very tough not only for Bill Ackman but more broadly for the business and you have many hedge fund clients we do I think that's an indica there's always going to be tremendous opportunities set for people who are good investors and beat the market there some times when it's harder and sometimes to me there's a cycle to everything and I think this is this particular moment is has been a tough cycle for for people to have breakout returns and so that returns it down I don't think that that's a I don't think that's that in 30 years I'll look back and tell you whether it was permanent is that a function though of interest rates partly there's a lot you know if there are times in the market where where it's very good or very bad in both of those cases everybody acts the same and you know we happen to be in one of those moments where interest rates are zero it's very hard to distinguish even on our own industry look I could be going back and saying and looking back and say my god this was the Golden Age these last eight years or so in banking but I don't think so there's a lot you know bank banks or spread businesses you know basically even we do even the way you price derivatives you know people lend you know basically there's a lending and a spread embedded in all these things and the spread of zero it's not much you can do and everybody if you don't get the gig as treasury secretary do you want to be would you take federal reserve care you know a unless you know otherwise and you'd probably here before me I still have a job who would you like to see be the chair of the Fed give it given that Donald Trump has made some comments that Janet Yellen will not be in that role oh I'd have to give you a list and I'll tell you I'll rank them how about John Taylor which is one of the names at the top of the way I don't have a view of that but I tell you whoever gets that job I'll get along with one final question for me then we'll open it up real quick to the audience you have decided to get into the retail business under the brand Marcus how did that happen what is that about don't you think Marcus is a great name where did that come from our founder was Marcus Goldman Anton answered the question by the way thank you thought we took his that we took his first name it sounds kind of oh but why go why go into retired what is it where's this going okay so we are in a retail unsecured lending business but the real the the real driver of that is not so much that we're going headlong into a consumer retail business the real driver of that is that the way the capital rules are we could grow it's much better for us to grow into summit and we're dissuaded from growing into certain activities that are capital intensive and it's easier to grow into other areas that are less capital that are more favored by the regulators and capital rules lending is a place which historically we haven't done as much of being a coming ready an investment bank and so what we are doing is we are building lending platforms and lending businesses so one of the places where we can go to where we thought we'd have a relative advantage and and and actually fill a need and fill a void is consumer lending not because it's a consumer business but because it's a very good lending business for us to go to and the reason why it's good is because the way consumer lending is made a lot of it is digitally approached Algar judgments are made algorithm you slap a credit card down and somebody's making a loan to you that's not somebody examining your character like Bailey savings and loan it's done on the base of FICO scores an algorithm and risk management which we think we're pretty good at deliver digitally which we think we're pretty good at it plays into our technology strengths there's obviously a consumer experience we have to import that title that talent important to get that right but the principle reason is we think and you can risk manage it we think we can deliver it and it's a good relatively safe locale relatively lower capital cost kind of a lending business and we're doing other lending businesses and it's valuable niche for us to fill because when you think of how much credit card debt there is out there and how expensive it is allowing people effectively to refinance that by taking out an unsecured loan from us with no fees very simple product and a much lower rate really accomplishes a lot for the consumers let's open up for questions how long does how big does that business ultimately become I mean you know we're going to we had this conversation ten years from now I hope we have I hope outstanding during the billions fair enough I think I got expected a couple of mics for question over here by way of introduction my name is Nizam la vie I'm a certain University of Michigan and we'll be serving Korean investment banking and in banking we learn a great financial skillset and I was curious to know how can we use that skill set to do social good in the world and are there opportunities for us as a new associate listen you'll you'll be afforded a very a lot of opportunity to apply your skills this morning I was at a I was at an event speaking an event for our 10,000 small business program which I which really is a matter of you know training and developing applying the skills that we do on a wholesale level to a retail level and really driving a lot of growth and job creation and that's very important but I would say the biggest contribution you'd make in a life well led in finance is that you will pick great companies to finance some of which might not get financing it might not exist but for your help and if you do a good job you'll get a reputation for that you'll attract other people to finance and go where you suggest they go to industries and companies those companies because of your contribution will expand hire people those people will earn a living and go out and they'll go out and buy products of other companies and that's the virtuous circle and so what I want to say is we will all have balanced lives and do a lot of philanthropy will apply our skills to different parts of the market that we don't otherwise get compensated for because they're underserved but probably the most important thing you'll do in your career is you'll do your banking job well and you'll finance great companies that will go out and provide the living livings for many many families who go out and stimulate growth in other sectors that's the most important thing that you'll do that would be a big contribution let's see we can just take one final question I see a hand back there go ahead thank you for taking my question I'd like to get your thoughts on the idea of Robo advisors and the whole debate of passive versus active and whether a lot of your current employees and chlorin clients as hedge funds eventually will be replaced by machines now it's very interesting I think generally machines are tools and they provide a lot of leverage and interest and like so much of other walks of life I think what machinery and algorithms do is it creates leverage which means you'll have fewer people engage in any activity any activity farming extraction because of because of because of machinery but the people that are involved in it at the fulcrum of that activity will become much more important than ever and so that's really you know part of what's driving some of the tectonic shifts that we're seeing in employment and wealth inequality the fact that technology allow so much leverage for things to get done with fewer people makes those fewer people in the business much more valuable to get the best of the best in that activity and leaves other people scrambling a bit to replace them simply replace their jobs by getting other skills which may or may not be available and that's part of the issue that there is in the world but they'll believe me there'll always be room for terrific performance and by the way those machines have to be programmed so when you program the algorithm to think like a person you that's done by a person Lloyd Blank find everybody thank you very very much thank you thank you see you in Washington see at the Treasury Building thank you so so much

Channel: New York Times Events

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Id: 6nRjfTvPLbc

Length: 25min 46sec (1546 seconds)

Published: Thu Nov 10 2016