UPDATE 1-Goldman CEO: Successor will come from within firm

Wed Dec 12, 2012 12:42pm EST

NEW YORK Dec 12 (Reuters) - Goldman Sachs Group Inc Chief Executive Lloyd Blankfein said on Wednesday he believes his successor will come from within the firm.

While the choice is ultimately up to Goldman's board of directors, Blankfein said: "It is a very high likelihood, close to 100 percent, that the next leader of Goldman Sachs is at Goldman Sachs."

Blankfein, responding to questions at a New York Times conference, said he is not yet giving up his post. Blankfein, 58, has been in the job since June 2006.

Addressing other topics, he said a deal in Washington to avert a "fiscal cliff" of steep tax hikes and budget cuts set for the end of the year is most likely to come at the last minute.

Until then, he said, neither side in the negotiations is likely to reveal compromises they will make for fear of being criticized by supporters.

"The way this deal will get done is when both sides put their hands on a proposal together just before the vote has to take place," said Blankfein, among corporate executives meeting with politicians to push for a deal.

Blankfein also warned bond investors to be careful about losses they will suffer when interest rates rise as the economy improves.

"One of the big risks that is looming," Blankfein said, is that "people are once again complacent about this low level of interest rates.

"At some point there will be a reversal and that will have an effect on portfolios and people will have losses," Blankfein said.

In the meantime, Goldman is urging companies to sell bonds to investors.

"We are advising all companies," he said, "to borrow as much as they think they are going to need for as long as they think they are going to need it, because interest rates are so cheap."

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