| NEW YORK
NEW YORK Nov 12 Goldman Sachs Group Inc
Chief Executive Lloyd Blankfein said on Tuesday that he regrets
collateralized debt obligation trades the Wall Street bank made
in the run-up to the financial crisis that later caused a
firestorm of public criticism.
Collateralized debt obligations (CDOs) are pools of bonds
that are bundled, sliced up according to credit risk, and sold
to investors. As the mortgage market heated up leading into
2007, investment banks began selling more exotic varieties
linked to mortgages.
Wrong-way bets on CDOs led to billions of dollars' in losses
for many investors and some investment banks, including Merrill
Lynch. But unlike its Wall Street peers, Goldman Sachs profited
by using CDOs to bet that the mortgage market would collapse.
While the trades were profitable at the time - to the tune
of $13 billion, according to a congressional committee - Goldman
suffered tremendous reputational fallout in the years after the
"I wish the organization hadn't done complex CDOs circa '06
and '07," Blankfein said at an industry conference in New York.
"And, post-crisis, I wish I had gotten off - a little
quicker off the mark in describing who we were and what we did
as a firm and how we looked to the world before everybody
defined us for us," he continued. "We were competing against an
existing narrative - it's very hard to get out of (that)."
The SEC brought civil fraud charges against Goldman in 2010
related to a CDO called "Abacus," arguing that the bank
defrauded clients who took long positions.
Goldman settled for $550 million without admitting to or
denying wrongdoing, but the reputational damage it suffered from
that lawsuit - as well as a damning congressional report - has
taken years to repair.
On stage at the conference, hosted by the industry trade
group SIFMA, Blankfein said Goldman's work is not yet done.
In response to a question about JPMorgan Chase & Co's
recent legal and regulatory challenges, Blankfein said
that although senior Goldman executives are back to spending the
majority of their time dealing with ordinary business issues,
they still have to worry about the consequences of actions the
firm took years ago.
"You say the spotlight's off - it's not completely off,"
Blankfein said. "We're still dealing with legacy issues."