Goldman Sachs CEO: I'm Sorry, Now Let's Do Business Together

There are few firms more emotive to the average consumer right now than Goldman Sachs (GS). With the announcement Tuesday that it is teaming up with much-loved billionaire investor Warren Buffett to hand out $500 million to small U.S. businesses, Goldman is hoping that it might be able to salvage some of its reputation on the sidewalk while it continues to prowl the Street hunting for lucrative deals. Or so it says.

The announcement follows an uncharacteristic apology by Goldman's chief executive Lloyd Blankfein for helping to cause the financial crisis. Goldman "participated in things that were clearly wrong and have reason to regret," Blankfein told the Financial Times earlier this week.

If he is merely face-saving, then Blankfein may already be regretting making the volte-face. "Shut up, Lloyd Blankfein," writes CNN's Paul R. La Monica. Others are no more charitable to the bank: Goldman's $500 million is a day late and a dollar short, according to Bloomberg's Mark Gilbert:

Here's another way of looking at this sudden burst of supposed generosity. Goldman has $16.7 billion stashed in its bonus pot from the record profit earned in the first nine months of the year, which works out at $527,192 per staffer.

That means those 10,000 small businesses the securities firm says it wants to help are worth the equivalent of about 1,000 Goldman employees. Alternatively, a Goldmanite's average contribution to society is pitched at the equivalent of 10 small enterprises, based on that bonus-versus-charity calculation.

More than anything else however, it is curious that Goldman Sachs is doing anything at all to repair its reputation in the hearts of the American consumer. For unlike Bank of America (BAC) or JP Morgan Chase (JPM), Goldman Sachs doesn't derive any particular benefit or drawback from what consumers think about it. As long as other institutions know that Goldman is the best place to go to float a company, look for a prime broker, buy a security, or seek advice about a merger, Goldman will continue to make money. In other words, the bank has no exposure to the retail customer whatsoever.

Does Blankfein Want To Enter Consumer Banking?
There are only three credible possibilities why Blankfein might be trying to repair Goldman's reputation right now: he doesn't want to lose employees as a result of their defections to another bank due to peer pressure from non-banking family/friends; he wants Goldman to enter the consumer banking space at some point in the future; Blankfein is simply cracking under public revile more commonly reserved for politicians.

The second possibility is the most interesting to speculate with. It has long been rumored that Goldman was planning a consumer lending service before the subprime crisis got underway. In today's environment however, marketing such a service to Joe Sixpack would an extremely tough job. (For a start, few would trust the bank.)

Perhaps then this year's package is designed to give Goldman Sachs an entry into the small and medium size business banking market, which over time, it intends to branch out into a separate division of its own?

That explanation would also gel with the lengthy time-line of the package: rather than getting the $500 million in one fell swoop, small businesses will receive a total of five $100 million payouts over the next half decade. What is more, thrown in with the package for Goldman is an operations genius when it comes to growing small and medium-sized companies: none other than the Sage of Omaha.

In that light, the package looks much more like a business plan than it does a charitable donation.