Wednesday, November 18, 2009

Reporter's Notebook

Paul Leonard can be reached at

An apology – and cash – from Goldman Sachs

They were more than participants in the largest market meltdown in history – they were pioneers in the creation of the complex financial instruments, such as credit default swaps, that helped make it happen.

And now, more than a year after the crash froze credit lines for thousands of small businesses, including many in Southwest Washington, Goldman Sachs says it’s sorry.

The investment house-turned-banking giant announced today that it would launch a $500 million initiative to help 10,000 small businesses. The fund will be partly run by Goldman majority shareholder Warren Buffett, who said the program would provide “greater access to know-how and capital – two ingredients critical to success.”

Access to capital critical to success? Thanks for the tip, Mr. Buffett.

The continuing unavailability of credit for established small businesses locally has to be the most puzzling aspect of this year’s economic downturn – even more so given President Obama and Treasury Secretary Geithner’s almost daily pronouncements of victory over the financial crisis.

To be sure, $200 million will go far to help some cash-starved businesses – even perhaps a few here in Clark County – ramp up spending and start hiring again.

However, here’s another figure to consider: $10.5 billion.

That’s the amount of small business lending sucked out of the system in the last six months by 22 of the nation's largest banks – many of which were recipients of taxpayer money via the Troubled Asset Relief Program. Long an investment and trading institution, Goldman joined the savings-and-loan ranks as a condition of its own bailout package late last year.

So let’s put these figures in perspective: if $10.5 billion is a gash requiring stitches, then $200 million seems more like a Band-aid.

However, cash wasn’t all Goldman had to offer today. Nearly 14 months after an unregulated derivative and credit default swap trading market helped almost bring the entire financial system to near collapse, this apology: “We participated in things that were clearly wrong and have reason to regret,” said Goldman CEO Lloyd Blankfein today in New York.

Thanks Lloyd.

As for Warren Buffett’s unapologetically naïve comments regarding capital flows to small businesses? Don’t worry, we won’t take it personally, Warren – we’ll still take your money.