Goldman, Buffett Establish $500 Million Small-Business Program
By Robert Schmidt and Christine Harper
Nov. 17 (Bloomberg) -- Goldman Sachs Group Inc., under fire in Washington for setting aside billions of dollars for bonuses a year after getting a taxpayer bailout, said it’s teaming up with Warren Buffett to provide assistance to 10,000 small businesses in the U.S.
The $500 million charitable effort coincides with one of the Obama administration’s top economic priorities: spurring hiring at smaller companies. The initiative aims to provide assistance -- ranging from counseling to obtaining funding -- to 10,000 businesses. Buffett’s Berkshire Hathaway Inc. is the largest shareholder in New York-based Goldman Sachs.
Goldman Sachs, the most profitable securities firm in Wall Street history, is trying to dispel criticism from lawmakers and pundits who portray the company as the greedy face of a financial industry whose excessive risk-taking fueled the credit crisis. Unlike competitors that make home loans and provide small-business credit lines, more than 90 percent of Goldman Sachs’s pretax earnings this year came from trading and principal investments.
“Small businesses play a vital role in creating jobs and growth in America’s economy,” Lloyd Blankfein, Goldman Sachs’s 55-year-old chairman and chief executive officer, said in a statement today. “We are pleased to work with our partners in this initiative to support small business owners, particularly in those underserved communities.”
The company has notified President Barack Obama’s administration about the small-business initiative, according to a person familiar with the program.
‘We Apologize’
Blankfein guided his firm to record profits in the first nine months of this year. The firm allocated $16.7 billion for compensation and benefits in the period, or enough to pay each employee $527,192 for nine months’ work.
Blankfein, speaking at a conference today sponsored by Directorship magazine, apologized for Goldman Sachs’s role in some of the activities that led to the financial crisis, without providing specifics.
“We participated in things that were clearly wrong and we have reason to regret and we apologize for them,” Blankfein said at the New York event. The magazine named him its CEO of the year.
The firm’s response to critics has been to try to come up with solutions to the industry’s and the country’s problems, Blankfein said.
‘Doing the Right Thing’
Goldman Sachs leaders ask themselves, “What are we going to do to fulfill our commitment and our obligation to the world to be good allocators of capital and make sure we’re doing the right thing, making sure we’re helping the country pull out of recession, grow businesses that help generate jobs?” Blankfein said.
The newly created “10,000 Small Businesses Initiative” will be guided by an advisory council co-chaired by Blankfein, Buffett and Harvard Business School’s Michael Porter. The council will include George Boggs, president and CEO of the American Association of Community Colleges, and Dan Danner, president and CEO of the National Federation of Independent Business.
The program will contribute $200 million to local community colleges, universities and other institutions to provide small- business owners with practical business education. Goldman Sachs will invest $300 million through a combination of lending and philanthropic support to community development financial institutions.
Buffett’s Investment
Buffett, known as the “Oracle of Omaha” for his investing prowess, is the second-richest American. Berkshire, which invests in companies ranging from retailers to insurers, paid $5 billion in September 2008 to acquire preferred stock in Goldman Sachs that pays a 10 percent dividend. Berkshire, based in Omaha, Nebraska, also gained five-year warrants to buy $5 billion of common stock at $115 per share.
Goldman Sachs repaid the $10 billion it was given last year under the taxpayer-funded Troubled Asset Relief Program, plus dividends. The firm continues to benefit from federal guarantees on about $21 billion of long-term debt. It was allowed to become a bank holding company to gain Federal Reserve support and was one of the biggest recipients of funds through the government bailout of American International Group Inc.
Lawmakers, unions, and media commentators have criticized the firm’s compensation, especially as the economic recovery appears to have rewarded Wall Street more than Main Street.
Shrinking Payrolls
The unemployment rate in the U.S. rose to a 26-year high of 10.2 percent in October. Payrolls fell by 190,000 last month, according to the Labor Department.
“Goldman Sachs seems to salute no flag but their own corporate logo,” Andy Stern, president of the 2.1 million- member Service Employees International Union, said at a rally yesterday in front of Goldman Sachs’s Washington office. He accused the company’s executives of “gorging themselves” on bonuses made possible by tax money from working Americans.
Because Goldman Sachs repaid its TARP capital injection earlier this year, the government has no direct say over its pay. The Treasury has subjected seven companies, including Citigroup Inc. and AIG, to compensation restrictions.
Goldman Sachs has previously unveiled charitable programs around the time of record employee payouts.
‘Shocking’ Pay
In November 2007, a month before awarding bonuses that were the biggest ever in the securities industry, the company announced plans to raise as much as $1 billion for a philanthropic fund called Goldman Sachs Gives.
The program was unveiled six months after John Whitehead, who retired as co-chairman of the firm in 1984 and oversaw its foundation, criticized Goldman Sachs’s “shocking” pay and said he’d tried unsuccessfully a year earlier to persuade the firm to donate $1 billion to charity.
The fund was formed with a $50 million contribution from Goldman Sachs and $80 million from partners at the firm, each of whom has an account and can guide how the money is spent.
In March 2008, the company said it planned to contribute $100 million over five years to provide business education to women in developing nations and elsewhere through an initiative called 10,000 Women. The program was established in 18 countries and has more than 60 partners.
Last weekend, Goldman Sachs helped sponsor a Washington party to benefit a human rights group. Held at the home of Juleanna Glover, a principal in former Attorney General John Ashcroft’s consulting business, the event featured women in the media, including journalists from CNN, the Washington Post and NBC News.
Buffett’s Gifts
Buffett pledged the bulk of his Berkshire shares to Bill Gates’s health and education foundation in 2006. The donation, valued at $30.7 billion at the time, is the largest charitable commitment in history, according to the Chronicle of Philanthropy.
Buffett has also raised more than $5 million in the past decade for the Glide Foundation by auctioning off an annual lunch. Buffett’s late wife volunteered at the San Francisco- based charity, which offers food, clothes, shelter and health care to the needy.
To contact the reporters on this story: Robert Schmidt in Washington at [email protected]; Christine Harper in New York at [email protected].
By Robert Schmidt and Christine Harper
Nov. 17 (Bloomberg) -- Goldman Sachs Group Inc., under fire in Washington for setting aside billions of dollars for bonuses a year after getting a taxpayer bailout, said it’s teaming up with Warren Buffett to provide assistance to 10,000 small businesses in the U.S.
The $500 million charitable effort coincides with one of the Obama administration’s top economic priorities: spurring hiring at smaller companies. The initiative aims to provide assistance -- ranging from counseling to obtaining funding -- to 10,000 businesses. Buffett’s Berkshire Hathaway Inc. is the largest shareholder in New York-based Goldman Sachs.
Goldman Sachs, the most profitable securities firm in Wall Street history, is trying to dispel criticism from lawmakers and pundits who portray the company as the greedy face of a financial industry whose excessive risk-taking fueled the credit crisis. Unlike competitors that make home loans and provide small-business credit lines, more than 90 percent of Goldman Sachs’s pretax earnings this year came from trading and principal investments.
“Small businesses play a vital role in creating jobs and growth in America’s economy,” Lloyd Blankfein, Goldman Sachs’s 55-year-old chairman and chief executive officer, said in a statement today. “We are pleased to work with our partners in this initiative to support small business owners, particularly in those underserved communities.”
The company has notified President Barack Obama’s administration about the small-business initiative, according to a person familiar with the program.
‘We Apologize’
Blankfein guided his firm to record profits in the first nine months of this year. The firm allocated $16.7 billion for compensation and benefits in the period, or enough to pay each employee $527,192 for nine months’ work.
Blankfein, speaking at a conference today sponsored by Directorship magazine, apologized for Goldman Sachs’s role in some of the activities that led to the financial crisis, without providing specifics.
“We participated in things that were clearly wrong and we have reason to regret and we apologize for them,” Blankfein said at the New York event. The magazine named him its CEO of the year.
The firm’s response to critics has been to try to come up with solutions to the industry’s and the country’s problems, Blankfein said.
‘Doing the Right Thing’
Goldman Sachs leaders ask themselves, “What are we going to do to fulfill our commitment and our obligation to the world to be good allocators of capital and make sure we’re doing the right thing, making sure we’re helping the country pull out of recession, grow businesses that help generate jobs?” Blankfein said.
The newly created “10,000 Small Businesses Initiative” will be guided by an advisory council co-chaired by Blankfein, Buffett and Harvard Business School’s Michael Porter. The council will include George Boggs, president and CEO of the American Association of Community Colleges, and Dan Danner, president and CEO of the National Federation of Independent Business.
The program will contribute $200 million to local community colleges, universities and other institutions to provide small- business owners with practical business education. Goldman Sachs will invest $300 million through a combination of lending and philanthropic support to community development financial institutions.
Buffett’s Investment
Buffett, known as the “Oracle of Omaha” for his investing prowess, is the second-richest American. Berkshire, which invests in companies ranging from retailers to insurers, paid $5 billion in September 2008 to acquire preferred stock in Goldman Sachs that pays a 10 percent dividend. Berkshire, based in Omaha, Nebraska, also gained five-year warrants to buy $5 billion of common stock at $115 per share.
Goldman Sachs repaid the $10 billion it was given last year under the taxpayer-funded Troubled Asset Relief Program, plus dividends. The firm continues to benefit from federal guarantees on about $21 billion of long-term debt. It was allowed to become a bank holding company to gain Federal Reserve support and was one of the biggest recipients of funds through the government bailout of American International Group Inc.
Lawmakers, unions, and media commentators have criticized the firm’s compensation, especially as the economic recovery appears to have rewarded Wall Street more than Main Street.
Shrinking Payrolls
The unemployment rate in the U.S. rose to a 26-year high of 10.2 percent in October. Payrolls fell by 190,000 last month, according to the Labor Department.
“Goldman Sachs seems to salute no flag but their own corporate logo,” Andy Stern, president of the 2.1 million- member Service Employees International Union, said at a rally yesterday in front of Goldman Sachs’s Washington office. He accused the company’s executives of “gorging themselves” on bonuses made possible by tax money from working Americans.
Because Goldman Sachs repaid its TARP capital injection earlier this year, the government has no direct say over its pay. The Treasury has subjected seven companies, including Citigroup Inc. and AIG, to compensation restrictions.
Goldman Sachs has previously unveiled charitable programs around the time of record employee payouts.
‘Shocking’ Pay
In November 2007, a month before awarding bonuses that were the biggest ever in the securities industry, the company announced plans to raise as much as $1 billion for a philanthropic fund called Goldman Sachs Gives.
The program was unveiled six months after John Whitehead, who retired as co-chairman of the firm in 1984 and oversaw its foundation, criticized Goldman Sachs’s “shocking” pay and said he’d tried unsuccessfully a year earlier to persuade the firm to donate $1 billion to charity.
The fund was formed with a $50 million contribution from Goldman Sachs and $80 million from partners at the firm, each of whom has an account and can guide how the money is spent.
In March 2008, the company said it planned to contribute $100 million over five years to provide business education to women in developing nations and elsewhere through an initiative called 10,000 Women. The program was established in 18 countries and has more than 60 partners.
Last weekend, Goldman Sachs helped sponsor a Washington party to benefit a human rights group. Held at the home of Juleanna Glover, a principal in former Attorney General John Ashcroft’s consulting business, the event featured women in the media, including journalists from CNN, the Washington Post and NBC News.
Buffett’s Gifts
Buffett pledged the bulk of his Berkshire shares to Bill Gates’s health and education foundation in 2006. The donation, valued at $30.7 billion at the time, is the largest charitable commitment in history, according to the Chronicle of Philanthropy.
Buffett has also raised more than $5 million in the past decade for the Glide Foundation by auctioning off an annual lunch. Buffett’s late wife volunteered at the San Francisco- based charity, which offers food, clothes, shelter and health care to the needy.
To contact the reporters on this story: Robert Schmidt in Washington at [email protected]; Christine Harper in New York at [email protected].
