Goldman Sachs (GS) Offers Loans To Financially Strapped Employees

Goldman Sachs (NYSE: GS), which is the recipient of billions of taxpayer dollars, and was also a large beneficiary of the AIG (NYSE: AIG) rescue, is now offering to lend money to more than 1,000 Goldman employees who have been hurt by the financial crisis. The New York Times reported that the loans were offered via e-mail last week, could range from a few thousand dollars to hundreds of thousands.

Goldman’s employees are losing money on their personal investments, specifically in Goldman’s own investment funds, which were once considered one of the perks of working at Goldman Sachs.

One of the vehicles that Goldman employees have invested in is a group of funds known as the Whitehall Funds, which fell more than 50% last year. Historically, these funds have traditionally performed extremely well, sometimes increasing sevenfold in a few years.

Some Goldman employees got rich before the markets collapsed, allowing them to invest millions in the funds, but often on a leveraged basis. The Times reported it was only three years ago, Goldman paid more than 50 employees more than $20 million apiece.

A main reason that employees are being offered loans because some of these employees invested in particular funds are contractually obligated to meet requests for more capital. Several funds have such capital calls scheduled for April. Employees who fail to make the payments risk losing their jobs, according to The Times. Therefore, the new loans at Goldman are being offered to help employees meet capital calls from the internal funds and cannot be used for other personal needs.

The employee loans may not turn out to be a profitable investment for Goldman Sachs, though Goldman can take employees who do not pay to court and/or seize money from their respective stock accounts.

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