CNBC Transcript: Goldman Sachs Chairman & CEO Lloyd Blankfein Speaks with CNBC's Wilfred Frost Today

The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Goldman Sachs Chairman & CEO Lloyd Blankfein and CNBC's Wilfred Frost on CNBC's "Squawk Box" (M-F, 6AM-9AM ET) today, Wednesday, April 18th. Watch video of the full interview on CNBC.com here!

All references must be sourced to CNBC.

JOE KERNEN: LET'S GET TO WILFRED FROST. HE'S LIVE IN CHICAGO WITH A VERY SPECIAL GUEST. YOU KNOW, YOU CAN COME - TELL LLOYD HE CAN COME ON IN NEW YORK TOO. DOESN'T HAVE TO JUST BE IN CHICAGO, WILF. BUT WE'RE GLAD TO SEE HIM.

WILFRED FROST: WELL, WE'RE HERE FOR A SPECIAL REASON WHICH WE'LL BE GETTING TO IN JUST A MOMENT. BUT FIRST I WANT TO SAY GOOD MORNING, AND THANK YOU LLOYD FOR JOINING US HERE ON CNBC.

LLOYD BLANKFEIN: GOOD MORNING. GREAT TO BE HERE.

FROST: I HAVE TO ASK QUICKLY, HAS THIS BEEN SCHEDULED IN ORDER TO CLASH WITH THE START OF JAMES GORMAN'S MORGAN STANLEY EARNINGS CONFERENCE CALL WHICH IS BEGINNING RIGHT NOW AS WELL.

BLANKFEIN: NO. IS HE HAVING A CALL?

FROST: YES. HE IS INDEED BUT I AM HOPING LOTS OF PEOPLE ARE TUNED IN

BLANKFEIN: WE SHOULD MERGE THOSE FEEDS? WE SHOULD ALTERNATE.

FROST: WE COULD DO THAT, BUT I THINK THIS IS GOING TO BE MORE BLOCKBUSTER, LLOYD SO LET'S GET TO THE TOPIC OF WHY WE'RE HERE WE'RE HERE FOR THE U.S./CHINA BUSINESS SUMMIT WHICH YOU'RE CO-HOSTING WITH CHINA INVESTMENT CORPORATION. THE LAST SORT OF ROUND OF THIS TYPE OF MEETING WAS IN CHINA NOVEMBER LAST YEAR WHERE VERY POSITIVE YOU ANNOUNCED WITH THEM A $5 BILLION FUND TO INVEST IN U.S. MANUFACTURING. SINCE THEN, THE TONE OF RELATIONS BETWEEN CHINA AND THE U.S. HAS DETERIORATED QUITE SIGNIFICANTLY. IS THAT RECOVERABLE?

BLANKFEIN: NOT ONLY IS IT RECOVERABLE, IT HAS TO RECOVER. WE'RE THE TWO BIGGEST ECONOMIES IN THE WORLD THERE IS NO - THERE'S NO PATH FORWARD IF WE DISAGREE OR ARE DIAGREEABLE WITH EACH OTHER OVER THE LONG-TERM. WE NEED TO WORK THINGS OUT. I UNDERSTAND WHAT'S TRYING TO BE ACCOMPLISHED HERE. WE'RE NOT TRYING TO END TRADE WITH CHINA, WE'RE TRYING TO EVEN IT OUT. THERE ARE DIFFERENT PERSPECTIVES AT WORK HERE. I'LL JUST SAY I WENT OVER IN THAT NOVEMBER, I WAS PART OF THAT TRADE MISSION THAT SECRETARY OF COMMERCE ROSS LED. IT LED TO A NUMBER OF SIGNED AGREEMENTS INCLUDING A CO-INVESTMENT BETWEEN OUR CLIENTS AND CIC WHICH IS THE SOVERIGN WEALTH FUND OF CHINA TO INVEST IN U.S. INDUSTRIES THAT IS U.S. MANUFACTURING COMPANIES WITH A VIEW TO INCREASING THE MANUFACTURING TO HAVE THEM SPECIFICALLY EXPORT MORE INTO CHINA WITH OUR CHINESE PARTNERS HELPING THEM GET ACCESS TO THE CHINESE MARKETS.

FROST: IS IT POSSIBLE THAT THE PLUG COULD BE PULLED ON THAT INITIATIVE GIVEN THE RAISED TENSIONS WE'VE HAD IN THE PAST COUPLE OF MONTHS.

BLANKFEIN: I WOULDN'T SAY AT THIS POINT ANYTHINGS IMPOSSIBLE, BUT THE COMMERCE SECRETARY ROSS WAS A KEYNOTE SPEAKER AT THE EVENT WE HAD LAST NIGHT THAT WAS CO-HOSTED BY OUR PARTNERS IN WHICH WE HAD DOZENS AND DOZENS OF U.S. CEOs AND THE SAME NUMBER OF CHINESE CEOs WORKING AND ENGAGING WITH EACH OTHER AND OF COURSE WHAT WE'RE DOING HERE CAN ONLY TIGHTEN THAT DEFICIT BECAUSE HERE IT'S CHINESE INVESTMENTS IN AMERICAN COMPANIES, AMERICAN JOBS TO MANUFACTURE AMERICAN GOODS TO SHIP TO CHINA AND SELL INTO CHINA. SO THIS IS GOOD ALL AROUND.

FROST: SO YOU'RE SOUNDING PRETTY RELAXED IF I MAY SAY ABOUT THE ISSUE. CLEARLY TRADE TENSIONS HAVE WEIGHED ON MARKETS SIGNIFICANTLY. BUT IT SOUNDS LIKE YOU DON'T THINK THEYRE THAT SEVERE. SO OVERALL DO YOU SUPPORT THE PRESIDENTS ATTEMPTS TO RENEGOTIATE THESE TERMS OF TRADE WITH CHINA.

BLANKFEIN: I QUITE UNDERSTAND AT THE END OF THE DAY EVERYBODY EVOLVES AND CHANGES. CHINA WAS A DEVELOPING MARKET THAT HAS DEVELOPED IN PART THEY NEEDED TO -- THEY HAD AN ECONOMY BASED ON EXPORT AT ALL COSTS. WHEN I SAY AT ALL COSTS, I MEAN EVEN SUBORDINATING INTERESTS ARE RESPECT TO THE ENVIRONMENT YOU KNOW, WHEN YOU HAVE TO GROW AT 10% BECAUSE YOU HAVE TO ACCOMMODATE A POPULATION MOVING FROM VILLAGES TO CITIES -- AND WANTING TO AVOID SOCIAL AND POLITICAL UNREST YOU MANUFACTURE, PRODUCE, EXPORT AND TO SOME EXTENT THAT IS GOOD FOR CHINA. AND BY THE WAY, GOOD FOR THE WORLD THEY ACHIEVE THAT KIND OF STABILITY. BUT AT THE SAME TIME SOME MARKETS AROUND THE WORLD INCLUDING MARKETS IN THE UNITED STATES GOT HOLLOWED OUT A BIT. AND SOME POLITICAL STABILITY THAT WAS WON FOR CHINA BY VIRTUE OF ITS TRADING PRACTICES RESULTED YOU MIGHT SAY IN SOME POLITICAL INSTABILITY AND ECONOMIC INSTABILITY IN THE UNITED STATES AND I THINK FROM THE U.S. POINT OF VIEW ITS TIME TO SAY LETS RE-EXAMINE WHERE WE STAND. AND SO I THINK THE KIND OF PRESSURE THAT'S BEING PUT TO BEAR IS FINE I THINK IT'S GOING TO WORK OUT NOT BECAUSE I'M SO POLLY-ANNISH I THINK IT IS GOING TO WORK BECAUSE IT HAS TO WORK OUT USUALLY THINGS THAT HAVE TO HAPPEN, HAPPEN AND YOU HAVE TO HAVE THE RIGHT BALANCE.

FROST: LET'S TOUCH ON YOUR EARNINGS YESTERDAY, LLOYD WHICH WAS A BEAT ON EVERY LINE OVERALL EPS, LET'S TALK ABOUT FIRST OF ALL THE BEAT BACK ON TRADING THERE WAS A LOT OF FOCUS ON TRADING LAST YEAR. BACK THIS QUARTER. CAN THAT LAST THE REST OF THE YEAR OR IS IT A ONE QUARTER BOUNCEBACK, AS IT WERE?

BLANKFEIN: IF YOU ASKED IT THE OPPOSITE WAY, THIS SURELY WOULD LAST FOREVER. I'D ALSO DISCOUNT THAT WE DON'T KNOW. WE'RE IN THE -- I SAY THIS -- WE'RE MORE IN THE CONTINGENCY BUSINESS THAN THE FORECASTING BUSINESS BUT THE CONDITIONS THAT PREVAIL WE'RE NOT TOP DECILE OR TOP QUARTILE CONDITIONS IN THE WORLD SO. YES, THEY'RE HIGHLY REPLICABLE I WOULD SAY. KIND OF FEELS ALMOST STANDARDISH BUT WHAT DIDN'T FEEL STANDARD WERE THE CONDITIONS OVER THE LAST COUPLE OF YEARS. PEOPLE WILL DEBATE BACK AND FORTH WHAT'S NORMAL WHAT'S THE NEW NORMAL BUT CONDITIONS WHERE INTEREST RATES ARE ZERO, YIELD CURVES ARE FLAT, THERES NO RISK PREMIUM. WHERE CENTRAL BANKS ALL AROUND THE WORLD ARE BUYING ALL THE RISKY ASSETS WHICH THEREFORE PUT A DAMPER ON VOLATILITY AND THE OPPORTUNITIES TO PERFORM, THAT'S NOT A NATURAL STATE. WE HAVE NOT REVERSED ALL OF THAT, BUT WE'RE WALKING THAT BACK AND WALKING TO SO THE FIRST INDICATIONS OF A WITHDRAWAL FROM WHAT IS AN UNNATURAL STATE. THE MARKET BECOMES A BIT MORE VOLATILITY PEOPLE GET COMPENSATED FOR THE RISK THEYRE TAKING. OUR CLIENTS ARE DOING BETTER CONSEQUENTLY WE'RE DOING BETTER WITH THEM. SO I WOULDN'T SAY WE'RE POPPING CHAMPAGNE CORKS. BUT WE CAN CERTAINLY SEE WHAT HAPPENS WHEN NORMAL -- WHEN WE START TO WALK BACK TOWARDS A NORMAL FINANCIAL MARKET.

FROST: THE SHARE PRICE TRADED DOWN PARTICULARLY ON THE NEWS THERE'D BE NO BUYBACK THIS QUARTER. DID INVESTORS MISUNDERSTAND THAT IS THAT A POSITIVE BECAUSE YOU'VE GOT OTHER USES OF CAPITAL FOR GROWTH?

BLANKFEIN: LOOK. YOU NEVER KNOW ON THE DAY THAT EARNINGS COME OUT, THERE'S SOME -- THE MARKET RALLIED INTO THE EARNINGS. THERE ARE ADJUSTMENTS THAT GET TO BE MADE. INVESTORS, MOST INSTITUTIONAL INVESTORS ON THE DAY OF EARNING THEY GO AND CALL FOR MEETINGS THEN THEY DISCUSS. IT'S VERY HARD TO FIGURE OUT FROM ONE DAY IN FACT, ALMOST EVERY TIME THERES AN EARNINGS ANNOUNCEMENT, OUR STOCK DROPS. ALSO PEOPLE KNOW THAT EMPLOYEES CAN SELL FOR THE FIRST TIME ONCE EARNINGS ARE RELEASED SO EVERYONE EXCECTS A WAVE OF INTERNAL SELLING. THERES A LOT OF REASONS FOR STOCKS TO GO DOWN INCLUDING THE FACT THAT WE ANNOUNCE THAT FOR THIS ONE QUARTER, WE'RE SUSPENDING BUYBACKS. AND WE'RE SUSPENDING FOR REASONS THAT ARE QUITE GOOD. ONE OF THE CRITICISMS AND UNAVOIDABLE FACT OF THE LAST FEW YEARS IS THAT THE OPPORTUNITY SET WAS FAIRLY LOW IN OUR INDUSTRY AND SO THE RIGHT THING TO DO, BUT WE WE'RE STILL EARNING A PRETTY GOOD RETURN AND EARNING MONEY. SO WE WE'RE GIVING MONEY BACK TO OUR SHAREHOLDERS SO THEY COULD INVEST IN PLACES WE SEE OPPORTUNITIES TO INVEST IN OUR OWN BUSINESSES NOW. AND SO GUESS WHAT WE ARE SO FOR THIS QUARTER WE'RE PLAYING A BIT OF A CATCH-UP. WE HAD AN ACCOUNTING EFFECT FROM THE CHANGE IN TAX LAW THAT REDUCED OUR CAPITAL. SO FOR THIS ONE QUARTER, RATHER THAN EKE OUT A RETURN OF CAPITAL AND SPREAD IT OVER A FEW QUARTERS, WE DECIDE WE TAKE THAT MEDICINE THIS QUARTER GET ADDITIONAL CAPITAL AND INVEST IN OUR BUSINESSES.

FROST: I WANT TO TOUCH ON SUCCESSION PLANNING.

BLANKFEIN: WHERE ARE YOU GOING?

FROST: VERY WELL SAID. NOWHERE, I HOPE. BUT YOU HAVE TO ASK THE BOSSES ABOUT THAT YOU AND I WERE CHATTING WITH DAVID. YOU AND THE BOARD MADE HIM SOLE PRESIDENT AND CEO RECENTLY. DOES THAT MEAN HE IS DEFINITIVELY THE NEXT CEO OF GOLDMAN SACHS?

BLANKFEIN: NO. NOTHING IS DEFINITIVE IT SHOWS MY EXPECTATION THAT HE BE THE PERSON. HE'S THE FOURTH COO I'VE HAD BUT I TELL YOU -

FROST: HE'S JUST NEXT DOOR. I HOPE HE CAN HEAR THAT.

BLANKFEIN: HE'S TERRIFIC. I'M KIDDING, EXCEPT THAT'S FACTUALLY TRUE MY EXPECTATION IS -- LOOK. WE HAVE A BIT OF A PROCESS. WE HAVE TERRIFIC PEOPLE. WHATEVER ELSE PEOPLE COULD SAY ABOUT GOLDMAN FROM TIME TO TIME, NOBODY DOESN'T THINK WE HAVE GREAT PEOPLE INCLUDING VERY SENIOR PEOPLE, SOME OF WHOM STICK WITH THE FIRM AND MOSTLY THERE COMES A POINT AT WHICH YOUR CAREER TAPERS OFF AND PEOPLE GO OUTSIDE WHERE THEY DO FANTASTIC THINGS. DAVID IS THE GUY WHO'S LEFT AND I HAVEN;T ANNOUNCED ANYTHING ABOUT MY OWN TIMING, BUT IVE BEEN DOING THIS JOB FOR QUITE A WHILE SO IT IS NOT CRAZY PEOPLE SPECULATE ABOUT THIS.

FROST: WHAT'S THE BIGGEST FACTOR ON TIMING? IS IT YOU NEED TO SEE MORE FROM DAVID OR YOU HAVE PERSONALLY MORE YOU WANT TO DO YOURSELF?

BLANKFEIN: I HAVEN'T -- I THINK THERE'S A KIND OF NOT A QUESTION OF SEEING MORE, BUT I THINK THAT THERES A CULTURALIZATION AND PERIOD YOU GET USED TO TO TALK ABOUT DAVID WHO I LIKE VERY MUCH AND WORKED WITH FOR A COUPLE OF DECADES, HIS EXPERIENCE AND BACKGROUND - HIS JOB UP TO THE POINT WHERE HE WAS COO FOR A YEAR NEVER REALLY SURVEYED THE ENTIRE FIRM. AND SO HE RAN INVESTMENT BANKING AND THEN BECAME COO. THERE'S A LOT OF COMPLEXITY TO OUR SALES AND TRADING BUSINESSES OR INVESTING BUSINESSES OR ACTIVITIES OVERSEAS. SO I THINK IT'S GOOD FOR HIM TO BE THE KIND OF CEO IN WAITING, IF YOU WILL, HAVE THE BENEFITS OF BEING ABLE TO SURVEY THAT AND HAVE A PERIOD OF TIME WHERE HE DOESN;T QUITE HAVE THE ACCOUNTABILITY FOR THE CONSEQUENCES.

FROST: LLOYD, WE HAVE A QUESTION FROM THE STUDIO FROM JOE.

BLANKFEIN: HEY, JOE. HOW ARE YOU?

KERNEN: LLOYD, YOU'RE STILL REALLY SHARP. I MEAN, THAT WAS GOOD. I'VE HAD -- YOU KNOW, WE'VE HAD THREE -- BECKY AND I HAVE HAD THREE CO-ANCHORS ON "SQUAWK" INCLUDING ANDREW TOO. WHO KNOWS. RIGHT? BUT YOU'RE STILL -- YOU CAN TELL YOU'RE STILL QUICK CAN I ASK YOU A QUESTION GOING BACK TO DAVOS, LLOYD.

BLANKFEIN: SURE.

KERNEN: YOU WERE IN A GREAT MOOD ABOUT BUSINESS CONDITIONS BACK THEN AND I GUESS IT HAD SOMETHING TO DO WITH JUST BUSINESS SENTIMENT, REALLY AND MAYBE THE UPCOMING TAX REFORM, DEREGULATION AND NOW YOUR EARNINGS REMINDED ME OF THE GOLDMAN IN THE PAST WHERE, YOU KNOW, THE ESTIMATE WOULD BE $3 AND YOUD EARN $6 OR SOMETHING. THAT HAPPENED A LOT. CAN THIS -- AND WILF REFERENCED IT IS THERE ANY REASON WHY 2019 OR 2020 ABSOLUTELY HAS TO BE WELL BELOW 2018 I SEE THE CBO SAYS THAT. EVERYBODY HAS THE IDEA THAT THIS IS ALL FRONT END LOADED BECAUSE OF TAX REFORM.

BLANKFEIN: LOOK. EVERYBODY'S NERVOUS. AND, YOU KNOW, BULL MARKETS CLIMB A WALL OF WORRY. IT'S GONE ON -- THE BULL MARKETS GONE ON TOO LONG. WE CAN HAVE DUELLING CLICHES HERE, BUT BULL MARKETS DON'T DIE OF OLD AGE, ET CETERA, ET CETERA I WOULD SAY THAT GENERALLY THINGS DON'T GO IN THE SAME DIRECTION FOR A LONG TIME BECAUSE PEOPLE OVER ADJUST TO THEM, EXPECTATIONS CHANGE, IF MONEY IS TOO EASY THEN PEOPLE PUT THEM IN FOOLISH PLACES AND THEY GET -- YOU KNOW, THAT'S HOW BUBBLES FORM AND THEY BURST. OF COURSE YOU DON'T SEE IT UNTIL HINDSIGHT, ET CETERA THERES GENERALLY AN EXPECTATION THERE WILL BE CYCLES TO THINGS I SHARE THAT EXPECTATION BUT IF YOU DIVORCED YOURSELF FROM A GENERAL FEELING AND ANXIETY AND JUST LOOKED AT THE FACTS AND THE NUMBERS AND WHAT YOU CAN MEASURE, YOUD SAY THINGS LOOK AWFULLY GOOD AND IT FEELS LIKE AWFULLY GOOD IN A WAY IN WHICH THERE COULD BE A BIT OF A RUNWAY HERE FOR THINGS TO REMAIN PRETTY GOOD INFLATION IS IN CHECK. INTEREST RATES, THEREFORE, ARE LOWER THAN YOUD EXPECT AT THIS PART OF THE CYCLE. PEOPLE ARE WORKING COMMODITY PRICES ARE IN CHECK. THE BIGGEST COMMODITY PRICE IS HELD A BIT IN CHECK BY THE POTENTIAL SUPPLY OF MORE OIL COMING ONLINE IF THE PRICE ROSE ENOUGH TO JUSTIFY INVESTMENT IN THAT SPHERE. COUNTRIES THAT WERE HALF A CYCLE BEHIND US ARE KIND OF CATCHING UP THEYLL ADD WEALTH CREATION INTO THE WORLD. THERES A LOT OF REASONS FOR OPTIMISM BUT THEN AGAIN YOU HAVE TO REMIND YOURSELF YOU DON'T HEAR THE ONE THAT GETS YOU. ONLY IN HIND SIGHT ARE THE PROBLEMS OBVIOUS I THINK WE WILL GO FORWARD HERE ON A PLAYBOOK THAT INVOLVES OPTIMISM WITH A KIND OF HEALTHY STATE OF ANXIETY THAT, YOU KNOW, GOLDMAN SACHS HAS BEEN PRODUCING IN ITS LEADERS FOR 149 YEARS NOW.

BECKY QUICK: HEY, LLOYD, LET'S TALK ABOUT SOME OF THE THINGS THAT COULD THROW US OFF THOUGH. I KNOW YOU SAID A LITTLE BIT AGO WHEN IT COMES TO THE U.S. AND CHINA TRADE TENSIONS, THAT YOU'RE OPTIMISTIC ABOUT THIS BUT YOU ALSO SAID THAT YOU'RE IN THE CONTINGENCY PLANNING BUSINESS. AND I JUST WONDER WHAT CONTINGENCIES YOU'RE PLANNING FOR IF THINGS DON'T GET RESOLVED, IF WE DO WIND UP IN SOME SORT OF A BROADER TRADE WAR?

BLANKFEIN: IF WE FIND OURSELVES IN A BROADER TRADE WAR, THINGS WON'T HAPPEN. BUYERS OF COMPANIES AROUND THE WORLD INCLUDE AMERICANS BUYING CHINESE, TAKING ADVANTAGE OF CHINESE OPPORTUNITIES. CHINESE BUYING ASSETS IN AMERICA. THAT'S ON THE INVESTMENT SIDE. THE -- WE ARE HUGE MARKETS FOR EACH OTHER. OBVIOUSLY WE'RE A BIGGER MARKET FOR THEM, BUT WE HAVE ASPIRATIONS TO CHANGE THAT. AND BY THE WAY, THE CHINESE HAVE ASPIRATIONS TO HELP US CHANGE THAT. THAT'S WHY WE'RE DEVELOPING THIS CORPORATION FUND. AND I THINK, YOU KNOW, TO THE -- YOU KNOW, MY OBSERVATION OF THE CHINESE AND I CANT SPEAK FOR THEM OR THEIR LEADERSHIP, BUT THEY'RE A KIND OF A CONSENSUS DRIVEN DIFFERENT POLITICAL SYSTEM BUT ALSO CONSENSUS DRIVEN. I THINK THE LEADERSHIP HAS BEEN EXPRESSING THAT THEY WANT TO OPEN THEIR MARKETS, THAT THEY WANT TO YOU KNOW, DEAL WITH SOME OF THE PROBLEMS THAT THE TRUMP ADMINISTRATION AND BUSINESS LEADERS GENERALLY HAVE IDENTIFIED ABOUT DOING BUSINESS IN CHINA AND THEY MADE GOOD PRONOUNCEMENTS BUT I'M SURE WHEN THEY GET BACK AND TRY TO DEVELOP A CONSENSUS AROUND IT, SOME OF THE BUSINESS INTERESTS IN CHINA GET A LITTLE BIT PAROCHIAL AND, YOU KNOW, SORT OF BETWEEN INTENTIONS AND EFFECT. THEY HAVEN'T BEEN ACCOMPLISHED. I THINK WITH THE PRESSURE THE ADMINISTRATION IS PUTTING ON, IT'S NOT ENTIRELY A BAD THING. WE GET TO THE RIGHT THING. AGAIN, MY OPTIMISM IS PREMISED ON THE IDEA THAT A REAL AGGRESSIVE MEAN SPIRITED TRADE WAR IS SO BAD AND THE NECESSITY AND THE ADVANTAGES THAT COME FROM TRADE BACK AND FORTH IS SO GOOD IT'D BE A VERY FARFETCHED THING TO NOT GET THERE WHEN WE KIND OF AGREE MOSTLY ON THE FACTS. IT'S JUST A QUESTION OF CHINESE WILL SAY THIS TAKES LONGER, WE'RE A DEVELOPING COUNTRY WE HAVE TO WAIT. IT TAKES TIME. WE SAY, GUESS WHAT THERE'S BEEN A LOT OF TIME. YOU HAVE DEVELOPED. YOUR ECONOMY IS VIRTUALLY THE SIZE OF OUR ECONOMY BY SOME MEASURES. A NEW DAY HAS DAWNED. LET'S GET WITH IT. THIS IS WHAT WE'RE TALKING ABOUT. AND I THINK IF THAT'S WHAT IT'S ALL ABOUT, WE SHOULD GET TO THE RIGHT PLACE.

MICHAEL SANTOLI: LLOYD, YOU -

BLANKFEIN: ALSO, WE NEED EACH OTHER IN A LOT OF OTHER THINGS AS WELL. LOOK AT THE SECURITY SITUATION OF THE WORLD WITH NORTH KOREA. HERE ARE OTHER THINGS AT STAKE HERE, MAYBE BIGGER THINGS AT STAKE THAT PROVIDE ANOTHER IMPETUS FOR US GETTING TOGETHER AND WORKING THESE ISSUES OUT.

SANTOLI: SURE, LLOYD, NOW GETTING BACK A LITTLE BIT TO YOUR BUSINESS. YOU ADDRESSED THE CORE BUSINESS IN THE LAST FEW MONTHS FEELING A LITTLE MORE NORMAL, PERHAPS, TO YOU PLAYING TO GOLDMAN SACHS' STRENGTH IN THE CORE FRANCHISES. I WONDER, THOUGH, IN TERMS OF THE BROADER BUSINESS MIX OF THE FIRM NOW, WE HEAR A LOT ABOUT SOME OF THE NEWER INITIATIVES LIKE CONSUMER LENDING, LIKE - AND I KNOW YOU MADE AN ACQUISITION RECENTLY OF A FINANCE -- PERSONAL FINANCE APP. WHATS GOLDMAN SACHS' EDGE IN THESE AREAS? WHERE DO YOU SEE IT GOING IN TERMS OF ITS ROLE IN THE FIRM LONG-TERM?

BLANKFEIN: SURE. LET ME SAY, I'M SUPER EXCITED ABOUT THAT SPACE FOR US. AND I THINK PEOPLE MISINTERPRET THIS TO SOME EXTENT. SO LET ME SAY, WE HAVEN'T JUST MOVED -- WE HAVEN'T LOST OUR MINDS MOVING TO A CONSUMER BUSINESS THAT WE WEREN'T IN HISTORICALLY. THE CONSUMER BUSINESS HAS MOVED TO US. BECAUSE, I MEAN, IF CONSUMER BUSINESS IS ONE THING IF YOU'RE LENDING -- YOU KNOW, IF IT'S A WONDERFUL LIFE AND YOU'RE JIMMY STEWART AND YOU'RE LENDING TO 500 PEOPLE AND YOU'RE LOOKING INTO PEOPLE'S SOUL AND CHARACTER DECIDING WHETHER TO MAKE AN INVESTMENT OR LENDING DECISION, THAT'S ONE THING. BUT IF YOU'RE LENDING TO 50 MILLION PEOPLE, IT'S MATH. IT'S ALGORITHMS. WHEN YOU SLAP DOWN A CREDIT CARD, THE CREDIT CARD COMPANY, THE BANK BEHIND IT IS MAKING A CREDIT DECISION TO EXTEND CREDIT TO YOU. REALLY? IN THAT SPLIT SECOND, HOW ARE THEY DOING THAT? THEY'RE DOING IT BY ALGORITHMS, SOPHISTICATED RISK MANAGEMENT METHODOLOGY. AND IT'S DISTRIBUTED ELECTRONICALLY. AND TO THE CASE OF CONSUMER LENDING IN OUR CASE, DIGITALLY. WELL, WE'RE VERY GOOD AT ALGORITHMIC TRADING. WE'RE VERY GOOD AT RISK MANAGEMENT. WE'RE VERY GOOD AT DIGITAL DISTRIBUTION. OBVIOUSLY A CONSUMER EXPERIENCE IS VERY IMPORTANT HERE AND WE HAD TO IMPORT THAT. IT'S IMPORTANT, BUT IT'S NOT THE BIGGEST PART OF THE ENTERPRISE AT THIS POINT. THIS HAS STARTED TO MOVE INTO OUR WHEEL HOUSE AND WE'RE TAKING ADVANTAGE OF IT NOW. NOW, WHY US? BECAUSE ON THE ONE HAND, WE HAVE THESE EXPERIENCES IN DIGITAL, A LOT OF THE WHOLESALE PLATFORMS THAT DRIVE THE WHOLESALE MARKET WERE CREATED BY GOLDMAN SACHS AND THEN HIVED OFF AND DISTRIBUTED TO A BROADER COMMUNITY. WE ALSO HAVE A BALANCE SHEET UNLIKE THE NORMAL DISRUPTERS OF MARKETS IN SILICON VALLEY, WE'RE A LICENSED BANK HOLDING COMPANY. WE CAN TAKE DEPOSITS AND LEND THEM OUT. THE OTHER BANK HOLDING COMPANIES NAMELY OUR COMPETITORS WHO'VE BEEN IN THE CONSUMER BUSINESS FOR A LONG TIME ARE A BIT OF A VICTIM BECAUSE OF THEIR LEGACY BUSINESSES. THEY HAVE BIG CREDIT CARD BALANCES AND ARE CHARGING ANYWHERE BETWEEN 16 AND 22 PERCENT FOR THOSE. THEY'RE NOT REALLY DYING TO REFINANCE THOSE CREDIT CARD BALANCES WITH CONSUMER LOANS AT 10 - 1,000 BASIS POINTS LOWER COST, OR 800 BASIS POINTS LOWER COST. WE'RE IN KIND OF A UNIQUE POSITION HERE. BIG BALANCE SHEET BANK, SKILL AT DIGITAL DISTRIBUTION, NO LEGACY BUSINESSES THAT CONFLICT WITH OUR CREATING A CONSUMER BUSINESS FOR 2018.

KERNEN: HEY, LLOYD, WE WERE IN WASHINGTON YESTERDAY. WE HAD A LOT OF PEOPLE ON FROM BOTH SIDES OF THE AISLE. WE HAD STENY HOYER ON, A COUPLE OTHER DEMOCRATS, WHO SAID THEY WOULD RETAKE THE HOUSE, THEY'RE DEFINITELY GOING TO REPEAL THE TAX REFORM ACT AND I DON'T KNOW WHAT THEY'LL DO WITH FINANCIAL REGULATION. AT THIS POINT, WOULD YOU PREFER THAT THE GOP HOLDS ON TO THE HOUSE AND SENATE OR WOULD YOU PREFER THE DEMOCRATS RETAKE THE HOUSE?

BLANKFEIN: I LIVE THIS BIFURCATED LIFE WHERE I'M GOLDMAN SACHS AND I'M LLOYD, YOU KNOW.

KERNEN: I KNOW. I JUST WANTED TO SEE HOW YOU'D ANSWER.

BLANKFEIN: ON THIS.

KERNEN: OKAY, HOW ABOUT FOR GOLDMAN SACHS, WHICH WOULD YOU PREFER?

BLANKFEIN: I PREFER - I'M FOR THE NONEXISTENT PARTY THAT IS A FRACTION OF EACH ONE. I'M FOR THE MODERATES. I WANT STABILITY. I WOULD LIKE TO THINK -

KERNEN: SIMPLE QUESTION. GOP OR DEMOCRATS RETAKING THE HOUSE. WHICH DO YOU WANT? YOU NEED TO - BINARY. YOU WANT THE GOP TO KEEP IT -

BLANKFEIN: I DON'T HAVE TO ANSWER. BECAUSE YOU ANSWER, YOU KNOW, YOU HAVE TO QUESTION THAT. OF COURSE! ON YOUR SIDE THE QUESTION IS SIMPLE, BUT AT THE END OF THE DAY, YOU'RE ASKING ME NOW OR PREDICATED YOUR QUESTION IS ARE DEMOCRATS GOING TO REVERSE A CONSEQUENTIAL PIECE OF LEGISLATION THAT WILL HAVE BEEN IN EFFECT FOR ALMOST TWO YEARS.

KERNEN: THEY SAID THAT.

BLANKFEIN: WHO WANTS TO LIVE THAT WAY? I WANT LEGISLATION TO HAVE INCORPORATED THE MODERATES OF BOTH HOUSES SO THEY CAN SUSTAIN THEMSELVES FOR MORE THAN ONE -

KERNEN: YOU KNEW I'D ASK YOU IT. YOU KNEW WHAT YOU KNOW. I KNOW YOU. YOU KNOW ME. I LOVE SORT OF -- JUST -- BECAUSE -

BLANKFEIN: I KNOW, YOU KNOW, I KNOW, YOU KNOW ME.

FROST: LOOK, I WANT TO JUMP IN. BECAUSE WE ARE GETTING TO KNOW YOU A LITTLE BIT BETTER BECAUSE YOU WENT ON TO TWITTER RECENTLY. AND A LOT OF YOUR COLLEAGUES I'VE SPOKEN TO SUGGESTED THAT WAS BECAUSE YOU WANT TO SORT OF SHRUG OFF THE IMAGE THAT GOLDMAN SACHS' -- A WALL STREET CEO MIGHT HAVE AND PUT ACROSS A WITTY, MORE NATURE SIDE. IS THAT TRUE?

BLANKFEIN: I'LL BE HONEST WITH YOU. I'VE BEEN CEO FOR 12 YEARS. I'VE BEEN TRYING TO GET THE IMAGE OF A NORMAL WALL STREET CEO.

FROST: BUT THE TWEETING IS THAT TO OFFSET SOME OF THAT AND PUT OUT THAT THERE'S A BIT MORE OF A LIGHT HEARTED SIDE TO THINGS. IS THAT A FAIR EXPLANATION?

BLANKFEIN: I WOULD SAY IT'S NOT THAT CALCULATED. WHAT I DID WAS I DISCOVERED - I DISCOVERED THE INSTRUMENT. I MEAN, I LIKE IT. AND I HAVE TO SAY, YOU KNOW, ONE OF SEVERAL THINGS I LEARNED FROM, IN A WAY, YOU KNOW, TRUMP HAS DONE IT, I'M NOT COMPETING WITH THAT. BUT WHAT I OBSERVED IS, LOOK, YOU'RE IN THE PRESS YOU HAVE YOUR RESPONSIBILITIES, I HAVE MINE. THE DAY BEFORE A STORY WILL RUN, I'LL GET A CALL FROM SOMEBODY OR A PRESS DEPARTMENT WILL GET, WE'RE GONNA SAY "BLIP, BLIP, BLIP" AND WE'LL SAY, "GEE, THAT'S WRONG. THAT'S NOT RIGHT. THAT'S A WRONG IMPRESSION. WILL YOU PLEASE CHANGE IT THIS WAY?" AND THEY'LL GO "NO." AND I'LL GO "OH MY GOODNESS. WHAT DO WE DO?" NOW YOU HAVE - EVERYBODY HAS ACCESS. IT'S BEEN A BIT OF A DISMEDIATION. AND SO ONE OF THE PAPERS WHO WROTE SOMETHING WHICH WAS INCORRECT AT THE TIME THAT WE WERE ABOUT TO DECLARE ME - WHAT WE WERE DOING IS WE WERE DECLARING THAT DAVID SOLOMON WILL BE THE SOLE COO, BUT INSTEAD THE STORY GOT CONFLATED WITH EVERYBODY'S EXPECTATIONS OF MY OWN TENURE. GUESS WHAT I WENT ON TWITTER AND I ADDRESSED SOMETHING. AND I DON'T HAVE TO -

FROST: AND YOU SAID, "I KNOW HOW HUCKLEBERRY FINN FEELS."

BLANKFEIN: I SAID, I KNOW HOW HUCKLEBERRY FINN FELT LISTENING TO HIS OWN EULOGY. IT GOT A LITTLE LAUGH BUT AT THE SAME TIME, I HAVE 90,000 FOLLOWERS NOT 90 MILLION FOLLOWERS, BUT I LOOK DOWN THE LIST AND 10,000 OF THEM ARE PRESS PEOPLE WHO THEN WRITE THE STORY AND PASS IT ON. AND SO IT'S NOT THAT CALCULATED. IT ALSO REFLECTS THE PERSONALITY. I LIKE THE FACT IT'S SHORT. I THINK IT'S A CHALLENGE TO SAY WHAT YOU WANT TO SAY, BE A LITTLE BIT PROVOCATIVE, NOT TOO PROVOCATIVE, AND SAY THAT IN A SMALL SPACE. SO I KIND OF LIKE THE MEDIUM.

FROST: LLOYD, IT'S BEEN A PLEASURE HAVING YOU WITH US AS ALWAYS. THANK YOU VERY MUCH FOR YOUR TIME. WE BETTER LET YOU GET BACK TO THIS VERY IMPORTANT CONFERENCE. THANK YOU VERY MUCH.

BLANKFEIN: WELL THANK YOU.

FROST: BACK TO YOU IN THE STUDIO.

KERNEN: THANK YOU, WILF. THAT WAS GREAT. THANK YOU, LLOYD, TOO, AS WELL.

BLANKFEIN: THANKS JOE.

KERNEN: WE HOPE TO SEE HIM HERE ON SET. THANKS LLOYD.

To post a comment, you must register and login.