Apparently, investment bank Goldman Sachs and billionaire investor Warren Buffett are trying to do their part to help the ailing U.S. economy by lending a hand to small business. Although few fault Buffett for his billions, mere millionaire bankers at Goldman Sachs have come under fire in recent months when reports surfaced that their earnings, and consequently bonuses, are exceeding even wildly optimistic expectations. But they're swooping in to give something back to the small businesses that they traditionally haven't paid much attention to. Let's break down the initiative.
Business and Management Education: Small business owners will receive practical business education delivered through partnerships between local community colleges, universities and other institutions. 10,000 Small Businesses will contribute $200 million to these partners to provide scholarships predominantly to underserved small business owners and build educational capacity.
Yes, because that business education served the financial community so well over the past few years, steering them away from taking poorly calculated risks and nearly bringing the entire economy down. Of course, I'm exaggerating. Formal business education is not totally worthless. Just mostly worthless. While a nice initiative, I'm pretty unconvinced this will do much for jobs, especially in the near-term.
Mentoring and Networking: Advice, technical assistance, and networking will be offered to participating small business owners through partnerships with national and local business organizations, as well as the people of Goldman Sachs.
And who wouldn't want a Goldman Sachs banker as their mentor? I'm sure they'll totally be able to relate to small business owners in Topeka from their swanky Broad Street headquarters in downtown Manhattan. All that flash trading experience will give them lots of practical advice too for bait-and-tackle shop owners.
Access to Capital: Goldman Sachs will invest $300 million through a combination of lending and philanthropic support to Community Development Financial Institutions (CDFIs). The investment will increase the amount of growth capital available to small businesses in underserved communities and expand the capacity of the CDFIs to deliver enhanced technical assistance to small businesses. 10,000 Small Businesses will provide technical assistance to graduates of the program to help them access other sources of capital.
Pardon me if I'm unimpressed, but it sounds to me like they're going to be so generous as to lend to firms smaller than they're used to. Quick somebody call the Pope to make sure there's still time to consider them for sainthood this year! I'm probably being a little unfair, as in a sense, there could still be some cost involved. Even if they do turn out to make money off this funding, the return on capital will likely be less than what they're used to. And some of this might include actual donations. Maybe.
Advisory Council: 10,000 Small Businesses will be guided by an Advisory Council co-chaired by CEO Lloyd C. Blankfein, Warren Buffett, and Dr. Michael Porter of Harvard Business School. The Advisory Council will assist in the development, execution and evaluation of the program.
I'm sure a great deal of tailored, individual advice will be provided to those 10,000 companies by these few individual financial titans. More council members will be involved, but those are the clear headline names, with the rest of the pack far behind in prominence and business savvy.
The total price tag of this initiative is a mere $500 million. That might sound like a lot to you or me, but it's a drop in the bucket for Goldman. Possibly less if the $300 million portion funding portion really consists mostly of loans instead of charity. Meanwhile, Goldman's 2009 bonus pool is said to be around $23 billion. So that amounts around 2% of their bonus compensation. Some people put a higher portion of their income than that into their church offering cup each year.
Maybe I'm crazy, but I don't think this initiative, though a pleasant effort, will have many angry Americans putting down their pitchforks currently pointed at Goldman. If Goldman really wants to impress anyone, they're going to have to do a little better than this.