NEW YORK—Facing increasing pressure about its record bonus payments, New York investment bank Goldman Sachs Group Inc. this week said it will partner with Warren Buffett to establish a $500 million program to aid U.S. small businesses.
Goldman, the most profitable bank on Wall Street, has reportedly set aside almost $17 billion to pay employee bonuses this year, an equivalent of more than $500,000 per employee—while the rest of the country still grapples with the effects of the economic recession. The bank, which repaid its $10 billion TARP loan earlier this year, has been labeled by some lawmakers and pundits as the face of Wall Street excess.
In response, CEO Lloyd C. Blankfein was quoted in the media saying that his firm was just doing “God’s work.”
This week, the bank has issued an about-face. Goldman teamed up with Buffett’s Berkshire Hathaway Inc.—the company’s largest single shareholder—to provide $100 million a year for five years to fund business and management education as well as loans and support for small businesses.
The effort will coincide with President Barack Obama’s vision of supporting small businesses, which employ more than 60 percent of U.S. workers, according to the Bureau of Labor Statistics.
“Small businesses play a vital role in creating jobs and growth in America’s economy,” said Blankfein in a statement. “We are pleased to work with our partners in this initiative to support small business owners, particularly those in under served communities.”
The initiative will help fund business and management education through local community colleges and other education institutions, mentoring and networking, and helping small businesses obtain loans and other funding.
Buffett, the chairman of Berkshire Hathaway, said in a statement that the program will help small businesses “create the jobs that America needs.”
While the bank was unapologetic about its record profits, Blankfein was quoted by the Financial Times saying, “We participated in things that were clearly wrong and have reason to regret,” referring to the practices that led to the financial crisis last year, and “We apologize,” he said.
While noble, Goldman’s announcement is viewed mostly as a PR boost.
The bank makes $100 million in trading gains on a good day, and $500 million—a large amount, make no mistake—is a drop in the ocean for Goldman’s coffers. And $500 million for small businesses will definitely help, and it should be better for U.S. taxpayers than having U.S. federal government dole out the same amount.
Most small businesses in the country are still struggling to make ends meet, and one can only hope that this gesture of goodwill from Goldman will usher other programs from large U.S. corporations that are already on the path of profit.