Goldman Sachs CEO Lloyd Blankfein is sorry. Speaking yesterday at a conference sponsored by Directorship magazine (which has named him CEO of the Year), Blankfein expressed remorse for the firm’s role in helping to bring the country to the brink of financial collapse:
“We participated in things that were clearly wrong and have reason to regret and we apologize for them.”
A few hours later, in a move Goldman swore wasn’t related to recent efforts to burnish its public image, the firm said it would spend $500 million to foster small-business growth—a helping hand to a Main Street still deeply struggling with the effects of financial crisis and recession (even as Goldman itself is back to record profits).
So, what do you say? Could it be time to forgive the vampire squid?
Let’s keep in mind that this is not Goldman’s first mea culpa. Over the summer, as the bank went to return its TARP funds, Blankfein wrote a letter to members of Congress which contained this nugget of blame-taking: “we regret that we participated in the market euphoria and failed to raise a responsible voice.”
That statement certainly undersold the company’s sizable role in creating the securitization monster that drove demand for more and more home loans, irrespective of people’s chances of ever being able to pay those loans back. At the height of housing hysteria in 2006, Goldman underwrote nearly a tenth of all mortgage-backed securities, according to Inside Mortgage Finance, more than three-quarters of which were subprime or Alt-A.
Nonetheless, a Wall Street CEO expressing regret—that was something.
Since then, Goldman has had some other telling moments in the spotlight, and not in a good way. Last week, Blankfein told a British newspaper reporter that he is just a banker doing “God’s work.” That didn’t ring quite right with Main Street, which, rest assured, still harbors plenty of resentment over what folks at Goldman and other finance firms get paid. Bloomberg has neatly calculated that the $16.7 billion Goldman set aside for compensation and benefits in the first three-quarters of the year is enough to pay each of its employees more than $500,000 for those nine months.
Now, this is the first time we’ve seen half a billion dollars funneled to the sorts of people who can ostensibly use it to create real economic growth, and not simply buy more-expensive Manhattan real estate.
Of the $500 billion million total Goldman has pledged, $200 billion million will go to community colleges, universities and other institutions to give scholarships to small business owners so that they can come learn skills like accounting, marketing and human resources management. The other $300 million will be handed out as loans and grants to the small businesses themselves.
That may seem like a great make-up package, but let’s not forget that Goldman has plenty to gain here, too. This is, after all, the juxtaposition the Obama Administration keeps making about the economy: Wall Street is fat, while small business owners struggle. With its $500 million, Goldman is effectively saying, “look, we play for that other team, too.” Pete Peterson thinks it would take at least $1 billion in charity work to mollify anger over pay at Goldman, but half of that surely goes a distance, too. Consider all those small business owners seeded throughout the country going to school on Goldman Sachs scholarships.
As for the $200 million in loans and grants, Goldman could also, I suppose, make a profit—at least to the extent that those loans and grants are loans and get repaid with interest.
More broadly, Goldman could—feasibly—see a shift in public sentiment. After all, apologies can go a long way. When doctors apologize for medical mistakes, they’re a lot less likely to get sued. There’s ongoing debate about when corporations should say they’re sorry, which some folks at Wharton summed up nicely a few years back, but the bottom line seems to be that, while risky, apologies can be game-changers.
And $500 million usually doesn’t hurt either.