Former Goldman Sachs CEO Blankfein warns of hidden "fire" risk in the private equity market

Why did Blankfein compare private equity assets to forest kindling?

Source: Global Market Report

Former Goldman Sachs CEO Lloyd Blankfein said investors should be cautious about the growing amount of unsold private assets on their balance sheets, some of which may be overvalued. A trigger could spark widespread asset devaluation.

“At some point, there must be an external force or a liquidation moment that forces you to confront how much your assets are really worth,” Blankfein said in an interview.

In his memoir “Streetwise: Getting to and Through Goldman Sachs,” published this month, Blankfein warned that the longer the time since the last crisis, the higher the likelihood of a larger-scale blow-up.

“I like to compare it to the combustible material accumulating on the forest floor—there’s always a spark,” Blankfein said. “But the longer the interval before the spark ignites the fire, the more kindling has piled up.”

He also expressed concern earlier this month about the growth of private credit in individual investors’ portfolios. “When individual consumers, meaning taxpayers and citizens, suffer losses, government officials become extremely unhappy,” he said.