As long as Larry, Serge, and Eric are in charge, I'll trust Google fully. I just worry that their benevolent legacy won't outlive me...
If you look at the full quote [0], it's actually quite reasonable and forthright. He's explicitly warning users that search engines, including Google, are subject to inquiries from law enforcement, and thus, should not be considered secure, rather than dismissing privacy out of hand.
[0]: http://www.schneier.com/blog/archives/2009/12/my_reaction_to...
At the end of the day, Google has done more good for privacy then all the users screaming at them.
(I think I'm being sarcastic.)