So Goldman Sachs is now concerned its company has a perception problem? They are even going to undertake a huge public relations offensive to turn things around? Well they sure have plenty of money to throw at this problem.
Goldman Sachs posted near record trading profits this past quarter, just a year after the near total collapse of the American economy. Net profits were $3.19 billion in the third quarter, up 105% over last year's third quarter. Goldman Sachs made all the right moves, including repaying the $10 billion in TARP money it received from the US Government with more than $400 million in dividends.
Goldman's recovery, along with that of other financial institutions, can in part be credited to government subsidies backed by the taxpayers. And Goldman Sachs undertook a riskier investment strategy, with overall leverage at about 17 to 1 versus about 28 to 1 before the crisis.
For sure, Goldman Sachs bankers work hard at creating value for their customers and shareholders. And their success should be rewarded. But a report that the firm had set aside about $20 billion for employee bonuses has caused a backlash. Critics say that Goldman Sachs is just back to its old money making ways.
Sadly Goldman Sachs doesn't really care what Main Street thinks. Rather they are concerned what Congress or the U.S. Government might do. This time, rather than insensitively and arrogantly dismissing complaints of excessive pay, the firm is now concerned that humongous bonuses may impact future profits. Even Goldman Sachs can be hurt by too much success. Especially when unemployment is above 10%, foreclosures are at a record high, deficits are unprecedented and the gap between the rich and poor has never been wider.
So a new lobbying initiative is underway in Washington along with major television interviews targeted at key decision makers in DC. Reports also say Goldman Sachs chief executive Lloyd Blankfein will talk about his first job as a 13-year-old -- selling peanuts at Yankee Stadium. So what, Blankfein once worked for peanuts.
The projected 2009 Goldman Sachs bonus pool will be around $20 billion, a near record amount. Therefore the average pay out per employee could be more than the $661,490 given in 2007. Memo to Goldman Sachs: most Americans don't make that much in a lifetime of working.
This year Goldman Sachs should tithe. Take 10% right off the top of the bonus pool, or $2 billion, and donate it to rebuilding New Orleans and the Gulf Coast of Mississippi and Alabama. Tap into their own brainpower to develop a plan to target the money on specific worthwhile projects so it does not get diverted to corrupt contractors and politicians. For starters, money could be used to rebuild the 9th ward of New Orleans, and devastated sections of Biloxi and Bay St. Louis, Mississippi.
Subsequently, Goldman Sachs should donate 10% of their bonus pool each year to a particular cause, helping injured and needy US military veterans, underwriting national after school programs designed to keep kids off the streets and out of trouble, curing diseases and the list goes on.
The US taxpayers supported the financial community when its collapse was imminent. Now it is time for financial institutions to help their country in its time of need.