MONEY TREE: Colleges May Benefit From Philanthropic Initiative by Goldman Sachs, Buffett
NEW YORK (AP) — Community colleges will be a chief beneficiary of a plan by Goldman Sachs Group Inc. and billionaire investor Warren Buffett to invest hundreds of million of dollars in small businesses and education.
Goldman and Buffett recently announced that they will team up to invest $500 million to provide thousands of college scholarships and to help small business owners get better access to capital.
The move comes as the company has been criticized for setting aside billions for employee paychecks despite the continuing weak economy and high unemployment.
The philanthropic effort, called “10,000 Small Businesses,” includes a $200 million contribution to community colleges, universities and other institutions to give grants to small business owners to further their education.
The New York-based bank also will invest $300 million through a combination of lending and charitable support. Goldman said the money will be funneled through community development financial institutions to boost lending and technical assistance available to small businesses in underserved communities.
In addition, Goldman Sachs executives, in partnership with national and local business organizations, will aid small businesses with advice, technical assistance and professional networking opportunities.
An advisory council co-chaired by Goldman Sachs CEO Lloyd Blankfein will oversee the program. Buffett, the legendary investor and Goldman’s largest shareholder, will serve as co-chair along with Harvard Business School Professor Michael Porter.
George Boggs, president and CEO of the American Association of Community Colleges, was named a member of the council.
“Community colleges are the gateway to higher education and the American dream for millions of entrepreneurs in our country,” Boggs said. “By increasing the capacity of community colleges, ‘10,000 Small Businesses’ is not only helping business owners — it is strengthening community colleges and the communities they serve.”
Other council members include, Glenn Hubbard, dean of Columbia Business School and Marc H. Morial, president and CEO of the National Urban League, among others.
In a statement, Buffett said, “Our recovery is dependent on hard working small business owners across America who will create the jobs that America needs. I’m proud to be a part of this innovative program which provides greater access to know-how and capital — two ingredients critical to success.”
10,000 Small Businesses, which has been in development for nearly a year, is a five-year program modeled on the Goldman Sachs 10,000 Women initiative, which creates partnerships between academic institutions and non-profits to provide business and management education to women around the world.
The first community college to participate will be LaGuardia Community College in New York City’s Queens borough, which houses a Small Business Development Center.
“This initiative will make it possible for LaGuardia, and leading community colleges across America, to help create jobs,” said college President Gail O. Mellow. “Right now, nothing is more important. Today, LaGuardia helps thousands of students gain the skills and education they need to work in today’s economy. With this innovative approach, we, and other community colleges, will have the resources to provide small business owners with hands-on education, training and consulting that can help them build their businesses.”
The first community development financial institution to receive financing from Goldman Sachs will be New York-based Seedco Financial Services Inc., with loans to underserved businesses in the New York area expected to begin early next year.
The initiative comes as Goldman has started to see a rebound across many of its businesses even as the broader economy and consumers continue to struggle with rising unemployment and mounting loan losses. The bank, which has outperformed other financial companies for years, has been the strongest in its industry throughout the financial crisis. It had less exposure to toxic mortgage-backed securities than other companies and also has been more aggressive in its trading.
Its continued strength throughout the downturn allowed Goldman to quickly repay the $10 billion government bailout it received at the height of the credit crisis. That repayment was also done, in part, to rid the bank of restrictions on annual compensation that were attached to the loan.
Goldman set aside $16.71 billion through the first nine months of the year for compensation, including salaries, bonuses and other benefits. The potential payouts its workers may receive for 2009 have drawn criticism from lawmakers and others. Andy Stern, president of the Service Employees International Union, led a protest in front of Goldman’s Washington, D.C., offices to try to sway the bank to redirect part of its anticipated $23 billion bonus pool to families facing foreclosure.
David Viniar, Goldman’s chief financial officer, has said the bank is “very focused on the economic climate” and will take that into account when decisions about workers’ bonuses are made at the end of the year.
With the bank’s public profile under attack, Blankfein reportedly admitted at a conference in New York that Goldman made mistakes leading up to the financial crisis.
Shortly before the small business program was announced, Blankfein apologized for the bank having “participated in things that were clearly wrong and we have reason to regret,” The New York Times said.