Interesting interview of Lloyd Blankfein, the CEO of Goldman Sachs published in the international edition of Der Spiegel, a reference German magazine. To read the full article in english, go here.

In essence Lloyd Blankfein “admits” some mistakes, but, of course, they are nowhere near the black image everybody has of them:

SPIEGEL: You say that Goldman did things better than many others in advance of the crisis. What was your biggest mistake?

Blankfein: Goldman Sachs has traditionally been strong in business with mergers and acquisitions. We also provide financing for acquisitions by companies …

SPIEGEL: … and through private equity funds, which shortly before the crisis financed corporate takeovers at astronomical prices using almost exclusively borrowed money.

Blankfein: When this market for so-called “leveraged finance” was booming, we wanted to remain competitive and maintain our market share. We extended even larger lines of credit to our clients and did so at the same time as lending terms were getting easier. When companies like Chrysler began to falter, we acted quickly, but we did not act quickly enough, which was a mistake.

Then, about inflation, Blankfein replies that his opinion is that the bankers are doing “exactly what needs to be done”. No I wasn’t paid by GS to write my piece “Eyes Wide Open”!

SPIEGEL: Will we see a significant rise in inflation over the next five years?

Blankfein: The central banks are currently pumping liquidity into the markets, and thus consciously accepting inflationary risks. At the same time, however, they are also bolstering the economy. And, do you know what? It may just be that these people are doing an extraordinarily good job. Still, it is risky. If the surplus liquidity is not siphoned off soon enough, inflation will result. But I would not discount the possibility that that the central bankers are doing exactly what needs to be done.

SPIEGEL: Do you invest in gold?

Blankfein: I am not bullish on gold.

Naturally, Blankfein discounts the theory of “too big to fail”, for him the issue is the same if there are “too many to fail”.

SPIEGEL: Wouldn’t it be much easier to simply limit the size of banks? After all, the danger of systemic contagion is less when the banks are smaller.

Blankfein: So what is “too big to fail”?

SPIEGEL: When a bank is so large that in the event of insolvency, it could take the entire financial and the entire economic system along with it into the abyss. The state would then rescue the financial institution with taxpayer money.

Blankfein: The size of the bank is not the most important factor. Whether a certain risk is bundled at a single bank or spread across several is completely irrelevant. That doesn’t diminish the size of the risk. In fact, this would only change the problem from “too big to fail” to “too many to fail.”

And finally Blankfein’s explanation for the crisis puts, of course, the responsibility on people who had taken loans they could not repay. Don’t see any fault in the derivatives! In short, the whole interview can be resumed in one sentence: not our fault.

Blankfein: No, I think you are assuming that this crisis was caused solely by highly complex derivative products. It wasn’t. Just look at a typical bank balance sheet. Most banks value their loans at the price at which they were issued. This applies to corporate and consumer loans, mortgages and credit card debt. All seemingly bread-and-butter transactions. And then there are a few derivatives and some more complex products.

SPIEGEL: What are you trying to say with that?

Blankfein: This crisis was not just caused by complex derivatives.

SPIEGEL: What caused it, then?

Blankfein: Too much money was lent to people who had bitten off more than they could chew. When the bubble burst and recession hit, default rates went through the roof.