Goldman Sachs “10,000 Small Businesses” initiative has joined with New Orleans. Goldman Sachs Chairman and CEO Lloyd Blankfein, and Mayor Mitch Landrieu (D-New Orleans), discuss the work they’re doing together, the Fed’s impact on the market and the current economic environment.
Lloyd Blankfein video interview and transcript embedded below.
goldman sachs up solidly today ceo lloyd blankfein. a good chunk of the business initiative goes to the city of new orleans. of course the financial industry goldman chairman and ceo lloyd blankfein along with new orleans mayor. so to the small business initiative in a moment. but first, lloyd, let me start by getting your take on what is going on in terms of the recent moves and federal reserve. do you think the market initially misunderstood what the fed is — all of a sudden we have nervousness, then three days of rally or don’t pay attention to the near term moves. the mark set big. and not homeogenius. bernanke said we will be data reflective but it is based on growth specifically then well ease ourselves, taper ourselves off quantitative easing. he said potentially by the end of the year. not necessarily if the data doesn’t support it. but otherwise — and that’s what he said. the market of course, took this as, oh, my god, the first moment. and it would be an avalanche. and that doesn’t have to necessarily be case. i want to ask you about another mover. and that is gold hitting a fresh three-year low. i know your analyst at goldman is one of the analyst out there talking abou gold and how we may very well see that continue. any thoughts on what the — do you see clients wanting to be in gold? do you see clients say, this is a hedge. not a commodity? any thoughts on what is going on there. i think gold has its moment when people lose all confidence and currencies and other places to store value when interest rates are low so gold is very cheap to hold. compared to where they have alternatives. as people get more confidence in the economy than in the currencies and as rates ral rally, it is not a very favorable market for gold. that is what we saw today certainly. i want to ask you how important this is for new orleans and incredibly important mr. mayor, but when you join the city of new orleans it bring $20 million in small business loan capital and network to small business owners in the city, this has to be something that moves the needle. huge. and i want to thank lloyd goldfein to try this product. new orleans is probably the country’s most immediate laboratory for innovation and change. one thing we have to do is create jobs and do it fast. there has to be a new relationship between public and private sector. and goldman sachs and 10,000 small business initiative fits perfectly. what do they tell you? we need more training. we need to build capacity, then access to capital. so the small business program with goldman sachs does all three of those. we bring in a quick executive mba program. now we have six individuals that had skin in the game. they had been in business for two years. when they get out they have access to $20 million in capital. so now they are a good credit risk. each one of these small businesses has six or seven jobs then it helps a city like new orleans who has below average employment rate. new orleans is a case, everybody’s heart was tugged when we saw images of post katrina in new orleans. it is a great city. also we are doing this in about a dozen cities. we look foinfrastructure. and we are taking people who are already successful small business people and giving them, as the mayor described, mini mba program. training. business planning. mentors. and at the end, give themccess to capital. and in connection with this, we need an infrastructure to help deliver those services and elements. the mayoras done a terrific job. also work through other partners including community colleges that remember the program. and we have a great partner in delgado in new orleans. as we have in a dozen other cities in america. that’s most important, right? education. a lot of companies, small companies, they can’t find the skill set required to actually make the hire. it has been an interesting component because it has everything. before, folks would say, i don’t have access to capital. there are no jobs, how will people give me something. now what lloyd said, they are not just giving money away, they are identifying people who have taken risk. . at least for two years. then they get trained. sit in a room with each other. then sit in a room with experts to get knowledge about how to grow. then when they get out, take the risk and borrow money. each one of theferent component are making them better small business people and evidence is reflecting that each one of the groups is sometimes doubling the amount of money that they make in a year. adding jobs, just as small businesses do. you can hit your numbers pretty good. it is not just about economic development. encouraging people to come in, but growth. it comes from small businesses and hand-to-hand combat. get an idea of who these people are. small business. caterer. security service. it may be a family business that’s gone on for three generations. ten employees. they don’t know what to commit to. and it doesn’t take a lot. if you’re in the catering business, do you pay for the freezer? how many years, how many months does it take to you earn that money back? good investment or poor investment? they stay prosen. they don’t do anything. they don’t have tools for analyzing. don’t have negotiation skills. accounting skills. but smart hugely ambitious and take people who are again already successful at a certain level. they dedicate week ends for months. they do this over their week ends and show commitment. we have 99% graduation rate. so once people start, they stay in it. and we teach them, accounting, business planning. analysis. everyone’s favorite course is negotiation. and network because they transact with each other. as the mayor said, we measure the heck out of this. so when it is done, we don’t just pat ourselves on the back. we make sure revenue is growing and look at what their hiring affect is. and most of the people hire new workers. what is your work, goldman’s work, in all these different regional economies? not just new orleans but across the country? what does it tell you about the broad state of the economy today? we are debating where we are all day long. particularly with the federal reserve and in the past you said it is a social science and mood and sentiment that doesn’t go hand in hand. it is not hard science. it is market sentiment in a lot ofcases. but if you just came back, if you just came back from mars, and somebody described to you economic conditions today, a deficit widening out and starting to converge, the energy picture, what that means for manufacturing the country, how much liquidity there is. you look at a lost these elements and say, my gosh, these conditions are ripe. i think this is a very good market. on the other hand you look at sentiment. that is not shocking. very big trauma. very recent. but the fact of the matter is we’ve chewed through a lot of problems. some of them are still there. just think, what have been talking about a year ago? gosh, is italy — is portugal and italy, greece, u.s. losing its rating. budget deficits growing out to the lines, never converging. and then you compare to where we are today. i’m in the risk management business. i can sit here for three hours and tell you and i wouldn’t be done telling you all of the things i’m worried about. but if you ask me what i think is likely, we muddle through and we are muddling through and we are part of the cycle. what about the federal reserves impact here. we are talking about the implications of central banks monetary policy. beginning of this tapering down. once rates remove, how does that change situation or impact the people of — well, it depends on how the market reacts. if it costs more to borrow money and municipality are left for the most part on their own, which is pretty much where we are now, then it could slow it down. if we continue it public-private partnerships and we move the needle and market reacts in a positive way and it continues to be at least, you know, a balance in terms of how much it costs to borrow money, i think we are okpch. but i think it is something that — see, i would have expected a lot more deal flow given the level of rates we have seen already. me too. what’s the story? i can explain anything in hindsight and tell me why we got there. if i would have predicted, i wouldn’t. i would say, trauma is big — it is a confidence thing. it is a confidence thing. in business, institutions, the penalty for making a mistake is very, very extreme at this point. and frankly, counter productive. and if you punish people for being wrong as opposed to being manevolent but just being wrong and consequence is so great, people won’t take risk. it is not just business that has to be risk takers. legislators, consumers, who have to decide they can spend. d i think we will get there but it is taking a little bit longer and i think the climate, and i talked about this before, sentiment has a real effect. again there is not natural science. it is a social science. so sentiment and people’s feeling really matters, confidence really matters. but you are really helping you are investing in new orleans and across the country in different regl economies. when i look at the regulatory environment and i see rules, dodd-frank, regulators all over the world. talking about compensation in switzerland and capital, and when i see the tax, and maybe not tax, but fees across the board, the same fee you will pay that j.p. morgan will pay. that bank of america will pay. and that doesn’t make sense to me because you have different size businesses. so how — why is it fair that all of the banks are going to be under the same rule making even though they are all different sizes? aren’t we killing small business? are we hurting small and mid caps? it played out and it takes the form of — by the way, same thing that is very hard to conform to, and so then the jobs act which relieved people from other provisions that apply to bigger firms that go to market. allowing capital to be raised more easily. i think there’s a tension between a system that is so well policed and believe me that’s in the front of everybody’s mind after the recent events. versus a cost of all that safety making it very difficult to advance. and that’s a pendulum moving back and forth. i’m not sure we’re in the right place. i think we should exempt some smaller institutions, including smaller banks from costs and burdens here. not everybody is too big to fail. and a pendulum swings, but it will swing back and it is not a shock to me that it swings too far in the first instance. you’re in a quiet period or about to start getting earnings can you give us a spence of your expectation broadly for the rest of the year? going into the second half now. not even a filter. we are somebody who reacts to growth in the world. so i will tell you if you want to know, industries like ourselves, which finance people’s growth, which advised people who want to make those decisions on whether or not to make acquisitions or not, who manage risky assets for clients, generally growth is the core lent or businesses. we are in with both feet with the countries and quite frankly, global growth. and when you look around the world, what is most appealing? u.s., asia, latin-america or both? u.s. is still the best place it invest. you know what best representation is? if you are a high performing person, any country, educated and entrepreneurial, you want to invest the most important thing you have, your career and coming to the united states. that’s not just my opinion, that’s the fact. bottom line. mitching with congratulations on the enormous investment here. one of our first targets and it becomes really the test case for everything we do that follows. mayor, lloyd blankfein.