Goldman Chief Shrugs Off Writedown Rumors

CEO Lloyd Blankfein says not to expect the Wall Street titan to join the growing ranks of its rivals.
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Don't expect

Goldman Sachs

(GS) - Get Report

to join the growing ranks of its competitors blindsided by multibillion dollar writedowns anytime soon, CEO Lloyd Blankfein said Tuesday.

Goldman has been under the microscope after reporting glowing third-quarter results as competitors, including

Merrill Lynch

(MER)

and

Citigroup

(C) - Get Report

, ousted CEOs on the heels of much larger than expected writedowns of asset-backed securities.

But Blankfein, speaking at a Merrill Lynch Banking and Financial Services Conference in New York, dismissed concerns that the Goldman franchise would take a similar hit in the near future. Responding to questions about whether Goldman would be announcing potential writedowns, the Goldman chief flatly said, "No."

Blankfein's remarks come after two weeks of speculation and rumors that suggested that Goldman was preparing to announce billions in losses on collateralized debt obligations, or CDOs.

Goldman maintains a net short position in the mortgage business and said that it remains relatively bearish on the sector at this point, Blankfein noted. The firm also downplayed the potential impact of new accounting rules that would change the way in which firms account for hard-to-parse assets, including leveraged loans and CDOs.

The statements sent Goldman's shares up about 6.7% in midday trading.

The Goldman chief commented broadly on the company's culture and the firm's emphasis on strong risk management and client relationships as strong drivers for its ongoing performance.

Goldman has been in the crosshairs of scrutiny primarily because it reported soaring earnings that were up 79% from a year ago to about $2.9 billion. The stellar performance comes as peer firms such as Citi and Merrill Lynch face a combined hit to their balance sheets of some nearly $20 billion due to bad bets on CDOs.

And more writedowns are expected. Even as Blankfein defended Goldman's own balance sheet,

Bank of America

(BAC) - Get Report

announced that it is expecting writedowns totaling more than $3 billion in CDOs.

For Goldman's part, Blankfein says the firm has placed a lot of emphasis on risk controls and making employees accountable for performance. "At the end of the day, we're not so prescient that we anticipate all these things and get there five minutes before," he quipped.

Punk Ziegel analyst Richard Bove

told

TheStreet.com

on Friday that he became much more confident with the bank's risk-management protocol and its software systems.

On Monday, the analyst upgraded Goldman's shares from sell to market perform, noting that the investment bank was not immune to losses but was well prepared.

Blankfein also said that Goldman is launching a number of new initiatives, including raising a $1.8 billion fund targeting debt assets. The fund, GS Liquidity Partners, is expected to invest in leveraged loans and other securities that have been hard to sell during the market's liquidity squeeze.