In Love, Actually, aging rocker Billy Mack keeps slipping back into the old lyrics. “You did it again, Bill,” his manager groans. Billy shrugs: “It’s just that I know the old version so well.”
That’s the Federal Reserve. That’s Jerome Powell. He learned the Exxon–GM–three-networks version so well that he keeps singing it while the orchestra has gone electric, wireless, remote. Inputs were predictable; outputs arrived with a bow. You sat at Jackson Hole and pronounced. But the modern economy is atomized, software-paced, real-time. Vinyl rules don’t play on streaming.
The old chart is on replay:
• 1929: the discount rate climbs from roughly 3.5% (early 1928) to about 6% (August 1929).
• 1929: the discount rate climbs from roughly 3.5% (early 1928) to about 6% (August 1929).
• Housing bubble: the Fed funds rate rises from 1.0% (June 2004) to 5.25% (June 2006) — loose money → asset boom → late tightening.
• Post-COVID: near-zero in 2020, then 11 hikes to 5.25%–5.50% by mid-2023 as inflation peaks near 9.1% (June 2022).
• Post-COVID: near-zero in 2020, then 11 hikes to 5.25%–5.50% by mid-2023 as inflation peaks near 9.1% (June 2022).
Old interest rate habits are hard to quit. In 2025 the Fed once again leaned on lagging gauges, tightened into a housing freeze where nobody sells and nobody can buy, then called the turbulence inevitable. Meanwhile, job cuts surged 183% — the highest level for any October since 2003 — and the worst year for layoffs since 2009. “Like in 2003, a disruptive technology is changing the landscape,” said Andy Challenger, workplace expert and chief revenue officer at ironically named firm, Challenger, Gray & Christmas. That’s the modern economy — atomized, software-paced, real-time — and it doesn’t run the vinyl Powell is playing. Not a conspiracy — just muscle memory.
It's near Christmas time, and the Fed’s alarm is ringing again. Only this time, it’s on mute. Which is why Lloyd Blankfein’s advice on the financial crisis serves as a wake-up call. “We are in the world of managing risk, not guessing,” he told me.
The Fed’s job now is to learn the new tune.
1) Don’t Outsource Judgment
Asked what the crisis taught him, Blankfein starts with an indictment of lazy certainty:
“The first lesson is do not delegate risk management to rating agencies. Second is that while remotely improbable events will happen rarely, there are improbable things that are guaranteed to happen every day. So you have to prepare yourself for things that have never happened before in the history of the world.”
His cure is old-school discipline dressed for modern risk:
“Make sure you’re well capitalized. Have all your exposures on your balance sheet. And mark your positions to market so you get the early warning signs. When things start to deteriorate, prices deteriorate, and if you can’t otherwise explain them, you’d better start searching.”
Swap in today’s vocabulary — LLM dashboards, ESG badges, cyber scores — and the warning is the same: tools inform; judgment decides.
Sidebar — Risky Business
• 1929: discount rate ~3.5% → ~6%
• 2004–06: Fed funds 1.0% → 5.25%
• 2020–23: near-0% → 5.25%–5.50%; CPI peaks ~9.1%
2) Get Closer to Home
Sidebar — Risky Business
• 1929: discount rate ~3.5% → ~6%
• 2004–06: Fed funds 1.0% → 5.25%
• 2020–23: near-0% → 5.25%–5.50%; CPI peaks ~9.1%
2) Get Closer to Home
How did Goldman spot trouble early?
“We started to see some assets weren’t holding up. To that moment, if you’d asked me, ‘Would real-estate assets at the end of ’06 or the beginning of ’07 go down?’ I would have had no idea. What I did have an idea about is what risks we were running, and the idea that we should get closer to home. We are in the world of risk management, not in the world of guessing. Through this period, I was sure that we were selling things that we would regret selling.”
“Closer to home” is a timeless operating rule. In 2025 it means leaders shorten the distance to first-order reality: model provenance, balance-sheet exposure, cash conversion, incident response. The further you drift from the source, the fainter the early warning.
3) Run to the Problem
Goldman carried its partnership DNA into public markets — and engineered incentives to reward collective cleanup over solo heroics.
“We were the last major partnership. When we became public we carried our partnership culture into the public company so we have an ownership culture. No one at Goldman Sachs gets paid out of his or her own P&L. It matters how your business is doing, but it matters more how the firm as a whole is doing. If you want to have a good career at most investment banks, you run as fast and as far as you can from the locus of the problem. At Goldman you run to the problem.”
Contact over optics. In an era when a rumor can jump from Discord to a dealer desk in minutes, the only winning move is to face the fire faster than the meme cycle.
4) Culture Is the Firewall
How does he keep signal strong inside the noise?
“We have a pretty flat organization at Goldman. And I would say I don’t have to invite people into coming into my office. I think people feel it is their right.”
And his own habit:
“I grew up in the middle of a trading room, and it’s just all noise. But if somebody 30 or 40 yards away, in just the din of the white noise, says something wrong, the whole room comes to a dead stop. It’s the same way with my phone calls.”
Flat lines of sight beat dashboards. A culture that can hear the wrong note will correct it before it compounds.
5) Human Capital
On compensation — why it’s always “the story of the moment” at Goldman:
“We don’t have inventory or costs of goods sold. All our firm has is people. The largest expense by far in our firm is people. Everything we produce for our shareholders is an override on the talents of our people.”
That’s not a defense of pay; it’s physics. In 2025 every firm is, functionally, a people firm. If talent walks, capital follows.
6) The Reputation Asset
Is he worried about the company’s image?
“The answer is yes. We’re a confidence business. Our reputation is very important to us. On the other hand, there are also people who feel that we and the industry participates in things that are clearly wrong, and some of this is real and some of this is extrapolated.”
What CEOs should do:
“Instead of responding in kind, fulfill the commitment and obligation to the world — in Goldman’s case, be good allocators of capital, make sure we’re doing the right things, make sure we’re helping the country grow businesses that help generate jobs. Is that enough? I don’t know… One thing I know for sure: Three years from now, I’ll know exactly what I should have done.”
Humility is the point. Confidence is capital; you earn it with behavior, not brand voice.
7) The Succession Grind
On the hardest task a leader has:
“Succession is the hardest thing we have to do. It’s not hard to keep the number-one quarterback in the league on your team, but what if the back-up quarterback would be the number-two quarterback in the league? And that’s something I spend a lot of time thinking about, and making sure people have a chance to grow in the firm.”
Continuity is resilience. Shadow benches don’t stay in the shadows — plan like they won’t.
8) The Tombstone Clause
Goldman’s public-service pipeline? He answers with a partner’s old admonition:
“When I first became a partner at Goldman Sachs, a senior partner had a chat with me and said two things: ‘You’re expected to keep all your shares in the firm’ and then, ‘When your epitaph is written, and it’s nine paragraphs long, no more than two should be about your career at Goldman Sachs.’”
Perspective is governance. People who think about their epitaph tend to manage the present with restraint.
Where This Leaves the Rest of Us
Thread Blankfein’s lines together and you get an operating doctrine for another noisy year:
• Don’t outsource judgment. Tools advise; leaders decide.
• Get closer to home. Proximity finds trouble while it’s still cheap.
• Run to the problem. Incentives should reward cleanup, not camouflage.
• Keep the room flat and audible. If the wrong note stops the floor, your culture works.
• Remember the confidence account. Reputation is a balance-sheet item, even if accountants don’t book it.
• Get closer to home. Proximity finds trouble while it’s still cheap.
• Run to the problem. Incentives should reward cleanup, not camouflage.
• Keep the room flat and audible. If the wrong note stops the floor, your culture works.
• Remember the confidence account. Reputation is a balance-sheet item, even if accountants don’t book it.
Cycles repeat; well-tested rules don’t age. And if you learned to hear momentum in the worst days of the housing crisis, you know when the market’s about to turn — long before the chart knows what’s happening.
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