Goldman Sachs is preparing for possible sovereign defaults in Europe, the company's CEO said Friday.
"It's in the nature of contingency planning and we plan for a number of contingencies" including defaults, Lloyd Blankfein said Friday after testifying in federal court at the insider trading trial of former Goldman director Rajat K. Gupta. "If it does happen, it would be irresponsible for us not to engage in contingency planning."
Blankfein did not go into detail about the kind of planning at Goldman Sachs, but said that the firm does not want to be caught by surprise if, for example, a country like Spain defaults on its sovereign-debt obligations. "If there's a shock and awe [situation], there may be awe but there won't be shock."
In February, it was revealed that Goldman sold $142.4 billion in credit default swaps that would pay out in the event Greece, Ireland, Portugal or Spain defaulted on its debt. Goldman also purchased swaps on the same debt worth an estimated $147.3 billion in all, according to Bloomberg.
Blankfein's comments echoed remarks he made at the end of his testimony at the Gupta trial earlier this week. Both the public and private sector are laying the groundwork for responses to defaults, Blankfein said Thursday, but stopped short of confirming outright that Goldman is preparing as well.
"This is a very big test for the EU as a concept," Blankfein said Thursday. "I'm rooting for it to work."
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