Transcript: Lloyd Blankfein on "Face the Nation," May 15, 2022

The following is a transcript of an interview with Lloyd Blankfein, senior chairman of Goldman Sachs, that aired Sunday, May 15, 2022, on "Face the Nation."

MARGARET BRENNAN: We want to return now to the economy and the financial challenges facing this country. We turn to the former CEO and current senior chairman of Goldman Sachs, Lloyd Blankfein, who joins us from Watermill, New York. Good morning to you.

LLOYD BLANKFEIN: Good morning, Margaret.

MARGARET BRENNAN: You know, Americans haven't experienced inflation like this in 40 years now, and the prices year over year are pretty incredible when you look at them, gas up 44%, eggs 23% increase year over year. There's spillover into the services, too now. I mean, you look at hotel prices, 23% increase, airlines over 30. What does all of this indicate to you?

BLANKFEIN: Well wage as well. I'll tell you how we got here. We had this massive exogenous event, COVID lockdowns all around the world. And at the time that this was- this was beginning, it was a huge crisis. And I would say you say worse in 40 years, kind of unprecedented that everywhere in the world all lockdown at the same time. In response, it was a massive public policy response and to overwhelm it, and it was a little bit of fighting the last war in some ways, because in the financial crisis, you recall, the feeling in the aftermath was it took a long time to recover from that. So this time we were going to go big and we went big and that created a lot of liquidity. And all those dollars of change are chasing- are chasing assets.

MARGARET BRENNAN: Mm hmm. So--

BLANKFEIN: So we have too much growth, too much stimulus.

MARGARET BRENNAN: Too much growth. Too much stimulus. So you agree with the San Francisco Fed when they--

BLANKFEIN: Right.

MARGARET BRENNAN: --when they point to things like all the fiscal spending adding to inflation?

BLANKFEIN: Sure. Now, again, at the time, it was very uncertain. And the most important thing was to not have it- was to not lose--

MARGARET BRENNAN: Right.

BLANKFEIN: --all those jobs and have a massive crisis. And so they reacted and I think they reacted sensibly with what they knew at the time.

MARGARET BRENNAN: Mm-Hmm.

BLANKFEIN: And you can argue about that, but that's all with the benefit of hindsight.

MARGARET BRENNAN: Right. Well, let's talk about what's happening now to try to control it. So it- it is the Federal--

BLANKFEIN: Sure.

MARGARET BRENNAN: --Reserve's job. You know this. But for our audience, you know, it's the central bankers--

BLANKFEIN: Sure.

MARGARET BRENNAN: --job to control inflation here. Chairman Powell said getting it down to 2% is going to involve some pain. What does that indicate to you? And do you think the Fed is doing what is needed right now?

BLANKFEIN: Well, the object is, you know, there's a- there's an imbalance, too much demand. And what you have to do is you have to slow down that demand. You have to slow down the economy. And so they're going to have to raise rates. They're going to have to curtail, hopefully reduce the number of positions that are unopened because they- and increase the size of the labor force. And that's going to involve some pain. And the real pain is not so is partly what the Fed is going to do, but it's just that this inflation, some of it is sticky. It's going to be you know, we have something like 8% inflation. Some of that is transitory. Some of that is transitory will go away. You know, eventually the war in the Ukraine will be over. Some of the supply chain shocks will go away, but some of it will be a little bit stickier and will be with us for a while. And while we're talking about this in the macro sense overall for individuals and certainly the individuals at the bottom quartile of the- of the- of the- of the pie sharing, it's going to be quite difficult and oppressive.

MARGARET BRENNAN: Difficult and oppressive. You lived through the last financial crisis.

BLANKFEIN: Sure.

MARGARET BRENNAN: Goldman Sachs obviously a key part. You know it very well. When you say it took a long time, it took about ten years to recover from the last financial--

BLANKFEIN: Yeah--

MARGARET BRENNAN: crisis--

BLANKFEIN: That's quite a long time.

MARGARET BRENNAN: Yeah. So given what you're saying is unprecedented, what is recovery look like? Are you saying strap in for more than a decade of struggle--

BLANKFEIN: Well--

MARGARET BRENNAN: --here?

BLANKFEIN: It's well, no, no. It's a little bit different. There was a lot- a lot of different things going on. And they were, you know, it's- it's always- it's always at least a little bit different. This is- this is kind of much different, and there you had the banks in trouble, a lot of distress, a lot of liquidity issues, big credit issues. Nobody was sure who was able to pay their- their- their debts as they arose. And that took- and then again, the financial system is the intermediary by which Fed accomplishes its activity. That's not impaired today. Actually, the consumer is starting out at a strong level. There is a lot of- it can be hard for people to- to have savings, but they already have savings they're not necessarily going to increase it quickly because of inflation. But they're starting in a much better place than we were then.

MARGARET BRENNAN: Mm-Hmm.

BLANKFEIN: And the Fed has very, again, powerful tools. Some of this will transition away. Some of the supply chain issues, again, will go away. China- China won't be locked down forever. The war will not go- and the Ukraine will not go on forever. Some of it- and some of these things are a little bit stickier, like energy prices. And there are some elements of the supply chain that are going to be a lot stickier. I'll give- I'll give you an example. We were the beneficiary for--

MARGARET BRENNAN: Yep.

BLANKFEIN: --a very long time of the globalization of the economy, which made goods and services cheaper because we took advantage of cheap labor and countries.

MARGARET BRENNAN: Right.

BLANKFEIN: Well, how good do we feel with what we've learned to be relying- this is part of your last talk with- with Secretary Buttigieg. How comfortable are we now to rely on those supply chains that are not within the borders of the United States--

MARGARET BRENNAN: Yeah.

BLANKFEIN: --that we can't control. Do we feel good about getting all our semiconductors from Taiwan, which is, again, an object of China.

MARGARET BRENNAN: Do you think we're headed towards recession?

BLANKFEIN: We're certainly heading- it's certainly a very, very high risk factor. And there's- but, you know, there's a path. It's a narrow path. But I- I think the Fed has very powerful tools. It's hard to finally tune them and it's hard to see the effects of them quickly enough to alter it. But I think they are- I think they're responding well. I think it's- it's--

MARGARET BRENNAN: Yeah.

BLANKFEIN: --it's definitely a risk. If I were running a big company, I would be very prepared for it. If I was a consumer, I'd be prepared for it. But it's not baked in the cake.

MARGARET BRENNAN: All right, Lloyd Blankfein, thank you for your insights. We'll be back in a moment.