NEW YORK, Nov 22 — Get this: Goldman Sachs will be taking out the garbage at Thanksgiving.
The giant United States investment bank is better known for raking in the profits, but in the past few weeks, its chief executive Lloyd Blankfein has been trying hard to stem rising public anger.
Goldman, which received US$10 billion (RM34 billion) in bailout money, made a record US$3 billion profit in the third quarter of this year and set aside nearly US$40 billion in compensation and bonuses ? the biggest employee payout in the firm’s 140-year history. It also became one of the most vilified financial firms on Wall Street.
Last Friday came news that 300 Goldman employees have volunteered for garbage duty at a charity Thanksgiving dinner for thousands of hungry New Yorkers. The Salvation Army plans to serve 10,000 free dinners across the city this Thursday. The number of meals is 10 times the amount last year as more Americans struggle to put food on the table.
Goldman employees, meanwhile, are getting US$16.7 billion in compensation and another US$23 billion in bonuses. That fact has drawn the ire not just of politicians and taxpayers but also, most recently, Goldman’s own investors.
According to a Wall Street Journal report last Friday, some of the company’s largest shareholders have asked Goldman to scale down its bonuses — though not because they look obscene during difficult economic times but because they’re cutting into investor profits.
The Journal article also revealed that the shareholders are worried that Goldman is employing an accounting trick to make per-employee salaries appear lower than they actually are. The firm is including temporary employees and consultants in the total workforce, driving average salaries down from US$775,000 to US$717,000 this year.
It did not help that last Friday too, reports surfaced that Goldman had promoted 272 executives to the ranks of managing directors, making them eligible for even bigger bonuses next year.
Demonising Goldman is made easier by what critics slam as the company’s clueless attempts to calm public anger and by the way these efforts seem to backfire.
Earlier this month, as a way to combat the bad press, Blankfein gave a rare interview to The Times of London in which he acknowledged the public animosity towards Goldman. “I know I could slit my wrists and people would cheer,” he said.
In that article, he took pains to point out that Goldman helps businesses by playing a key role in financial markets. But it was a single comment that he made towards the end of the interview that got all the press. The comment - apparently made tongue-in-cheek - that Goldman was “doing God’s work” ? was taken seriously and widely ridiculed.
Then earlier last week, the beleaguered Blankfein announced that the firm would donate US$500 million over five years to help 10,000 small businesses across the US.
The Huffington Post reported that this “generous” sum was just 3 per cent of the US$16.7 billion that Goldman had set aside in pay — bonuses excluded - for its employees this year.
The same day he unveiled the small business programme last week, Blankfein also apologised for Goldman’s role in the financial meltdown.
He also cancelled Goldman’s Christmas party for the second year in a row. But the media was quick to report that the firm’s executives had found ways around the ban on Christmas parties by calling them “dinners”. The Business Insider uncovered at least six dinners organised by executives and paid for by the executives or sponsored by an outside law firm, Associated Press reported last Friday.
The latest news is that Goldman has now hired high-powered international PR firm Brunswick to represent it. But Goldman’s detractors say its problems go deeper than bad PR. To them, Goldman continues to embody the same Wall Street greed and arrogance that helped bring about the financial crisis.
In giving the highest pay in the world to its employees, it failed to recognise that it owes its position and its very survival to the US government. Goldman is definitely making a lot of money, but this money includes a combination of public “rescues”:
The US$10 billion loan from the Treasury, that it has repaid;
“Holding company” status with access to cheap loans from the US Federal Reserve and guarantees against losses, giving it more power to trade billions of dollars; and
The government rescue of American International Group (AIG), which critics claim was a “backdoor bailout” of Goldman itself.
In that last example, the Fed agreed to pay Goldman and 15 other banks, in full, for US$62 billion of insurance contracts they had with AIG to protect against price drops of mortgage securities they held. Goldman received more than US$14 billion.
For all of this, Goldman has lost the public’s trust. Until it regains that trust through real reform, say critics, it may continue to be the poster child for what is very wrong with Wall Street. - Straits Times
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