Money Round-up

Pope Francis’ Plaintive Plea.  In his new apostolic exhortation to Catholics around the world, Evangelii Gaudium (“Joy of the Gospel”), Pope Francis beseeches the rich to “help, respect and promote the poor” and “return economics and finance to an ethical approach which favors human beings.”  The Pontiff dismisses the notion that trickle-down economics will bring about greater justice and inclusiveness as a “crude and naïve trust in the goodness of those wielding economic power” and asserts that “as long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and attacking the structural causes of inequality, no solution will be found for the world’s problems.”  According to the Holy Father, our culture of prosperity has deadened us to the plight of the poor and, in order to avoid our degenerating into a totally heartless society, we must rid ourselves of the ‘idolatry of money’.

‘Venture Philanthropy’.  While big US banks have for years been giving generously out of their own funds to public projects of all kinds, Goldman Sachs has come up with a ‘venture philanthropy’ model designed to appeal to the ‘better instincts’ of its wealthy clients according to CEO Lloyd Blankfein.  The bank has just launched a $250 million fund that will invest client monies in social impact projects such as early childhood education and affordable housing for the poor.  For each project, the fund and the local government for whose benefit the project is being underwritten will determine a discrete benchmark – such as a 10% improvement in pre-school aptitude test scores — whose achievement within a specified period will constitute success.  If the project is successful, the local government will repay fund investors the principal amount of their original investments plus a modest, market return and then assume continued responsibility for the project.  If the project fails to achieve its benchmark, fund investors will forfeit their entire investment and the project will be discontinued.  Morgan Stanley also just announced the launch of its Institute for Sustainable Investing which intends to raise up to $10 billion in client funds over the next five years to invest in social and environmental projects that also deliver market returns.   According to CEO James Gorman, “our clients are increasingly [seeking projects] that secure lasting and safe supplies of food, energy, water and shelter.”

Bonanzas for US Banking’s Bigwigs.  You will recall that, back in 2009, top executives at the big US banks were forced to accept unvested stock and options instead of upfront cash bonuses in order to curb their short-term profit-taking instincts and promote strategic thinking.  Those shares and options were to vest in three-to-five years and are now becoming eligible for sale.  In the meantime, the share prices of banks such as JPMorgan and Goldman Sachs have rebounded sharply after plunging during the financial crisis.  JPM, for example, is up 82% since the start of 2009, and CEO Jamie Dimon stands to reap a $19.3 million bonanza from his 2009 deferred compensation package.   Goldman is up 30%, and CEO Lloyd Blankfein is about to enjoy a $10 million jackpot.  Not bad for executives of bailed-out financial institutions.   

China Comes Down Hard on Investment Fraud.   We may slap jail sentences on con artists who bilk investors out of their hard-earned nest eggs, but the Chinese have taken the punishment of financial fraud to a whole new level.  Last month, a 42 year-old Chinese woman by the name of Su Yenyu was sentenced to death for diverting to her own use almost half of the $200 million she raised from local folks to invest in restaurants, health clubs, coal mines and farms.  Because the “amount of the fraud was extraordinarily large and caused significant damage to both the country and the people,” the High People’s Court of Inner Mongolia ruled, “in such cases, the death penalty is mandatory.”   A similar sentence was handed down in May of this year against another Chinese businesswoman, only 30, who borrowed $16 million from private citizens in Wenzhou purportedly to invest in real property and credit guarantees and then lost almost all of it speculating in gold futures.