Goldman Outsmarting Us Again: Charitable Trust More Like New Business Venture

It takes a lot for the CEO of the most powerful Investment Bank in the world to apologize for contributing to the cause of the financial crisis. For Lloyd Blankfein however, this was the right decision to save face for Goldman. On Tuesday he announced, “Goldman participated in things that were clearly wrong and have reason to regret.” On a side note Blankfein also initiated a $500 million lending program to small U.S. Businesses that will be watched over by Warren Buffet. So what’s this need for such generosity? Why aren’t J.P. Morgan, Wells Fargo, Bank of America, and Citi offering the same helping hand or does Goldman have something else up their sleeve? For one I don’t think Goldman has anything to apologize about, they were one of the numerous contributors to the financial crisis. Moving on what’s wrong with handing out big bonuses when they have earned it with record profits so far this year. Yes Goldman has $16.7 billion stashed in bonuses for employees this year. That’s a $527,192 bonus per employee. So in the grand scheme of things, $500 million is chump change.

What’s Goldman Really Up To?

What Blankfein is doing is saving face with Main Street and its reputation with America to help launch its next operation, Consumer Banking. It makes perfect sense, Goldman doesn’t care what the consumer thinks overall. As long as other institutions know that Goldman is the best place to buy a security, seek advice about a merger, or float a company, Goldman will make money. As for hiring process, as long as all the top talent knows they will get paid top dollar for their work then Goldman is where they will land. All together they have no interactions with the retail customer. Many speculated that Goldman wanted to enter the consumer lending business before the sub prime crisis got out of control. Currently though marketing any service to Middle America would be a tough sale. Unless of course they were to help lead a resurgence in Small Businesses within America, hence the $500 million charitable donation. This package can be Goldman’s entry into small business banking which down the road can become a separate decision within the bank. It is a plan destined for success. Blankfein has outsmarted America again. Look at the time-line of the plan. Instead of handing out it all at one he has set it up in small payments over the next five years so slowly the banks reputation will improve. Even more genius was whom he chose to head the project. Warren Buffet the king of growing small/medium sized companies. I think this is a sneaky but effective plan for Goldman and in the end it’s more like a strategic business plan not a charitable donation.

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