Goldman's Blankfein Says Credit Crisis Close to End

April 10 (Bloomberg) -- Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said the credit crisis that's forced almost $250 billion in losses and writedowns at the world's biggest finance companies may be approaching an end.
``We're closer to the end than the beginning,'' Blankfein, 53, said today in response to an investor question at the company's annual shareholder meeting in New York.
Blankfein's comments follow similar remarks by Morgan Stanley Chief Executive Officer John Mack, who said earlier this week that the end of the credit-market contraction that began with subprime mortgages may be in sight. Mack said it would probably last ``a couple of quarters'' longer.
Likening the crisis to the periods in an American football game, Blankfein said that ``we're maybe at the end of the third quarter, or the beginning of the fourth.'' He warned that fourth quarters often last longer because of time-outs, and sometimes go into overtime. ``No promises on how long that is,'' he said.
After the collapse of the subprime mortgage market in the past year, losses spread to leveraged loans, commercial real estate and municipal bonds. Goldman, the biggest securities firm by market value, posted record profit last year, avoiding writedowns that caused historic losses at Merrill Lynch & Co. and Citigroup Inc.
`Say on Pay'
All 12 of Goldman's board members won re-election for another year with more than 97 percent of the vote, the company said at today's meeting. Support for a so-called say-on-pay proposal that would give investors a non-binding advisory role on executive compensation was backed by 42.7 percent of the vote, a higher percentage than the 36.8 percent of Morgan Stanley shareholders who backed a similar proposal.
Goldman's first-quarter earnings fell 53 percent, the biggest decline since the company went public in 1999, on losses from investments and lower revenue from trading and investment banking. The drop followed four consecutive years of record profit.
Market participants remain skeptical and the cost to protect corporate debt from default rose for a third day today as concerns resurfaced that banks and securities firms face more losses. Credit-default swaps tied to Goldman, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. rose, signaling a decline in investor confidence.
``As the world is nervous, so are we,'' Blankfein told shareholders. ``Our resting state, in good times, is to be very nervous.''
U.S. Economy
Blankfein also said that, while economic growth in the U.S. has slowed and is currently ``fluctuating around zero'' percent, he doesn't foresee a deep recession.
``It feels relatively shallow,'' Blankfein said. ``By the end of the year we think we will be on a growth curve again.''
Banking stocks may be poised for a recovery, Tobias Levkovich, Citigroup's chief U.S. equity strategist, said in an interview today in Frankfurt. He has an ``overweight'' rating on the industry after the Standard & Poor's 500 Financials Index fell 21 percent last year and another 12 percent this year.
``We have probably passed the worst point,'' Levkovich said today. ``But I expect the volatility to continue.''