Ex-chief believes there are parallels to global financial crisis amid shadow banking concerns
The man who led Goldman Sachs through the 2008 financial crash says he can “smell” a fresh crisis brewing.
Lloyd Blankfein said he saw parallels to the global financial crisis and saw signs the economy was getting closer to a crash.
“I wonder where there’s hidden secret leverage,” he said in an interview with Pablo Salame, Citadel’s co-chief investment officer.
“Now everyone says, ‘Oh, the world’s not leveraged.’ That’s exactly what everybody said in the mortgage crisis until you suddenly discover that there was a lot of mortgage risk in Iceland.”
“It sort of smells like that kind of a moment again,” Mr Blankfein added. “I don’t feel the storm, but the horses are starting to whinny in the corral.”
Mr Blankfein, who ran Goldman from 2006 until 2018, said the financial system appeared to be moving towards another catastrophe as a result of the boom in private credit, a corner of the market often referred to as shadow banking.
He criticised private credit lenders for attempting to encourage retail access at a time when they are most unstable.
“One has to worry about opaque assets where there’s illiquidity,” he told Bloomberg in a separate interview. “We’re getting close to the end of late stages of cycles on this and we’re due for a kind of a reckoning.”