BUSINESS

Lloyd Blankfein: Libor Scandal Undermines 'The Integrity Of The System'

07/18/2012 03:02 pm ET | Updated Jul 18, 2012

The Libor scandal is hurting the financial industry, according to Lloyd Blankfein.

During an interview at the Economic Club in Washington, D.C. on Wednesday, the Goldman Sachs CEO said the international rate-rigging scandal is "undermining the integrity of the system that has already been undermined substantially."

"There was this huge hole to dig out of, in terms of getting trust back," he added. "Now it's that much deeper, and that's going to be a big burden for all of us."

Sixteen major banks, not including Goldman Sachs, are currently under investigation for allegedly rigging the Libor rate, a key interbank lending rate that acts as a benchmark for interest rates around the world. This time, Goldman is likely to escape the worst of a scandal's scrutiny, thanks to its lack of involvement in the incident.

That lack of involvement may explain his willingness to take a strong stance. Jamie Dimon, CEO of JPMorgan Chase, one of the banks being investigated, dodged a question about the scandal last week on the bank's earnings call.

Goldman Sachs has launched a charm offensive in recent months, with Blankfein out in public more in an aim to convince people that Goldman Sachs is a good bank with the highest standards, rather than a vampire squid.

Blankfein acknowledged in the interview that it's not only scandals like the Libor scandal hurting Wall Street's reputation. He noted that the Goldman itself didn't do enough to gain the trust of "citizens and taxpayers" before the financial crisis, claiming that the Goldman spent zero money on advertising before the crisis.

"We had no dialogue with consumers because we simply weren't a consumer bank," Blankfein said. "We were a little mysterious... In hindsight, that is a mistake."

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