Goldman Sachs' Not-Very-Charitable Foundation

Geraldine Fabrikant gets her hands on the 2008 tax filing for the Goldman Sachs Foundation today, and it’s pretty astonishing stuff:

The latest tax filing for Goldman Sachs’s foundation is as thick as a phone book. The list of trades is more than 200 pages, single spaced. Goldman, it seems, invests like no other, even for its own charity.

“I have never seen anything like it,” said Verne O. Sedlacek, president of Commonfund, when shown the 2007 filing, which was nearly three inches thick. He has a good overview from the Commonfund, which manages more than $25 billion for universities, foundations and other not-for-profit groups.

What good does all this extreme trading do? Not very much, it would seem, according to Fabrikant’s numbers:

• Goldman has given $501 million to the Goldman Sachs Foundation since 1999
• The present size of the foundation is $404 million
• The foundation gave away $12.6 million in 2007 and $22 million in 2008.

Goldman doesn’t reveal the foundation’s investment returns, but clearly they’re negative: the amount of money in the foundation is lower than the amount donated to it, even after accounting for the sums it’s given away.

What’s more, Goldman seems to be giving away only the bare minimum of the foundation’s assets each year: just 5%, the level below which the foundation would lose its charitable status.

I’m going to take a wild guess here and say that the foundation’s counterparty, on its phone-book-sized list of trades for just one year, was always or nearly always Goldman Sachs. And when Goldman Sachs trades with anybody, be it a client or the Goldman Sachs Foundation or anybody else, Goldman Sachs makes money.

Meanwhile, the foundation itself, as we’ve seen, has been losing money.

And who are the charitable recipients of the foundation’s funds? Entities like the Asia Society, on Park Avenue, which is a talking shop where Goldman bankers can schmooze important international clients. Or big universities like Johns Hopkins and Duke, which take charitable gifts and keep them in the market by adding them to their endowments and investing them rather than spending them.

All in all, the single biggest beneficiary of the Goldman Sachs Foundation would seem to be Goldman Sachs itself, while the amount of money which trickles down from it to genuinely needy charitable cases is minuscule. Goldman should turn its foundation into an arm’s-length institution, charged with giving money where it can do the most good, and allowed to give much more than 5% of its total assets if it sees the need to do so. Because right now the foundation looks mostly like an exercise in self-dealing.

Update: One other thing: why on earth couldn’t the NYT have either linked to the tax filing, or put it online? Most annoying.

Comments

[Graham and ...:]

The Asia Society is a de facto Goldman subsidiary? What next?

Nov 12 02:57 PM

[BAK:]

Give me a break! Can we find anything else to dump on Goldman about?

Nov 12 02:59 PM

[Davewmart:]

'One other thing: why on earth couldn’t the NYT have either linked to the tax filing, or put it online?'
Perhaps because:
'Because right now the foundation looks mostly like an exercise in self-dealing.'
With a few perks for their buddies, too!

Nov 12 03:20 PM

[Destin:]

Apparantly we can, which says a lot more about Goldman than it does about us.

On Nov 12 02:59 PM BAK wrote:

> Give me a break! Can we find anything else to dump on Goldman about?

Nov 12 05:44 PM

[lucasjkr:]

I'd be interested to see if the Goldman foundation trully does execute it's trades through goldman sachs. That itself might be a related party transaction, even if the Foundation received more favorable terms than other clients.

Past that, I don't see what all the whining is about. I work for a firm that serves several Foundations, and none of them gift much more than 5% of their assets per year. The thinking being that if they can generate investment returns, then the Foundation can last for longer and continue to give into the future, rather than making a single outright gift/grant and watching that get spent.

As for the balance of the foundation's assets. Again, it doesn't seem surprising. That Goldman Sachs donated money to the foundation, and now, after having given away 5% of its asset value per year and having gone through the same bear market the rest of us have gone through, why is it surprising that it now has less assets than were given to it? Clearly, the Foundation didn't do its trading as Goldman Sachs did (ie, shorting mortgage backed securities, etc), but then, shorting securities in general is iffy for Foundations, given that that exposes it to UBTI.

And again. You complain that they give donations to other tax-exempt organizations, including endowments? Is there something inherently wrong with that? That's helping to pay for the education of our country's future.

So yes, I'll agree with the prior posters and say that of all the things to waste time writing blogs about bashing Goldman, this is the biggest non-issue I can think of.

Nov 12 06:30 PM

[Phnomnl Phils:]

I just wish GS wasn't supporting The Barnes On The Ben Franklin Parkway Art Museum Fiasco in Center City Philly. The Barnes Move is the greatest abuse of the National Cultural Trust since the land barons tried to thwart the formation of the National Parks; and, it is the greatest state-sanctioned misappropriation of art and other antiquities since World War II (or didn't WWII happen Goldman??!?). Barnes Move supporters should Grow a Conscience and STOP THE MOVE!!! KEEP THE BARNES IN MERION GOLDMAN! See Barnesfriends.org

Nov 12 11:42 PM

[ehhhh:]

Your wild guess is wildly off mark; GSAM cannot trade with GS' securities division. As is the case for all of street.

As a long time reader, I've come to respect your work as voice of reason and sound analysis in an ocean of noise, which is why these (recent) zero-hedge style, zero-reasearch rants are so unfortunate.

You're better than this Felix.

Nov 13 09:17 AM

[nym:]

The IRS form requires that they pledge to make it available to the public: call Goldman up and ask them. The form also lists the members of the board, which should be interesting.

Nov 13 04:28 PM

[TMTObserver:]

No, I think it says more about an ugly culture of jealousy, and a herd mentality where it has become socially fashionable to dump on GS really only because of its enormous success. It is remarkable. In all the probably thousand pages of GS bashing that I have read, I have yet to encounter anything that remotely represents true evidence of any wrongdoing. Plenty of conspiracy theories, innuendo and inference, but no evidence.


On Nov 12 05:44 PM Destin wrote:

> Apparantly we can, which says a lot more about Goldman than it does
> about us.
>
> On Nov 12 02:59 PM BAK wrote:

Nov 14 04:28 PM