Forced Bank Charity?
Typically big profits for a Wall Street bank translate into large bonuses for the firm's executives. But this year's bonus season could be tempered by an unprecedented measure: mandatory philanthropy. Goldman Sachs is reportedly considering a plan to force employees to give part of their bonuses to charity.
The move would be a preemptive measure for Goldman, which is concerned about its public image in light of the financial crisis. Although most of the country wallowed in recession last year, many of Wall Street's behemoths raked in a remarkable amount of money.
Goldman made a tidy $12 billion profit (the highest in its history). J.P Morgan Chase and Citigroup reported $4.5 billion and $6 billion in profit respectively. Like many of their peers in lower Manhattan these banks received billions of dollars in federal bailout cash.
That money has since been repaid but many Americans are understandably bitter about the banks' bailout and subsequent record profits. Goldman's move looks like a smart one after New York Attorney General Andrew Cuomo demanded that eight of the biggest banks in the Big Apple hand over information on their bonuses.
Cuomo, who said that "transparency and disclosure is essential," asked for extensive details on how the banks structured the payouts. The issue will come to Washington later this week when the special congressional commission to investigate the financial crisis grills Goldman Chief Executive Lloyd Blankfein, J.P Morgan Chase CEO Jamie Dimon and Morgan Stanley Chairman John Mack on their "compensation package" policies.
If the White House criticism is any indication, the banks won't leave DC without a serious scolding. Yesterday President Obama's economic advisor Christina Romer labeled the bonuses "ridiculous" and "offensive."
And earlier today White House Chief of Staff Rahm Emanuel criticized the banks for not helping the economy grow. Goldman's charity move is a small but growing trend on Wall Street.
Last year Morgan Stanley Chairman John Mack announced that he would not take a salary in 2009. Morgan Stanley and Goldman have also pledged to limit the size of their bonuses.