updated 11/18/2009 10:13:34 AM ET 2009-11-18T15:13:34

Goldman Sachs Group Inc. is teaming with billionaire investor Warren Buffett to invest $500 million to provide thousands of small business owners across America with college scholarships and boost their access to capital.

The move comes as the company has been criticized for setting aside billions for employee paychecks despite the continuing weak economy.

Goldman's philanthropic effort, called "10,000 Small Businesses," includes a $200 million contribution to community colleges, universities and other institutions to give grants to small business owners to further their education.

The New York-based bank also will invest $300 million through a combination of lending and charitable support. Goldman said the money will be funneled through community development financial institutions to boost lending and technical assistance available to small businesses in underserved communities.

In addition, Goldman Sachs executives, in partnership with national and local business organizations, will aid small businesses with advice, technical assistance and professional networking opportunities.

An advisory council co-chaired by Goldman Sachs CEO Lloyd Blankfein will oversee the program. Buffett, Goldman's largest shareholder, Warren Buffett, and Harvard Business School Professor Michael Porter will serve as co-chairs as well.

"Our recovery is dependent on hard working small business owners across America who will create the jobs that America needs," Buffett said in a statement. "I'm proud to be a part of this innovative program which provides greater access to know-how and capital — two ingredients critical to success."

The initiative comes as Goldman has started to see a rebound across many of its businesses even as the broader economy and consumers continue to struggle with rising unemployment and mounting loan losses. The bank, which has outperformed other financial companies for years, has been the strongest in its industry throughout the financial crisis. It had less exposure to toxic mortgage-backed securities than other companies and also has been more aggressive in its trading.

Its continued strength throughout the downturn allowed Goldman to quickly repay the $10 billion government bailout it received at the height of the credit crisis. That repayment was also done, in part, to rid the bank of restrictions on annual compensation that were attached to the loan.

Goldman compensation
Goldman set aside $16.71 billion through the first nine months of the year for compensation, including salaries, bonuses and other benefits. The potential payouts its workers may receive for 2009 have drawn criticism from lawmakers and others. Andy Stern, president of the Service Employees International Union, on Monday led a protest in front of Goldman's Washington, D.C., offices to try to sway the bank to redirect part of its anticipated $23 billion bonus pool to families facing foreclosure.

David Viniar, Goldman's chief financial officer, has said the bank is "very focused on the economic climate" and will take that into account when decisions about workers' bonuses are made at the end of the year.

With the bank's public profile under attack, Blankfein reportedly admitted at a conference in New York Tuesday that Goldman made mistakes leading up to the financial crisis.

Shortly before the small business program was announced, Blankfein apologized for the bank having "participated in things that were clearly wrong and we have reason to regret," The New York Times said.

10,000 Small Businesses, which has been in development for nearly a year, is a five-year program modeled on the Goldman Sachs 10,000 Women initiative, which creates partnerships between academic institutions and non-profits to provide business and management education to women around the world.

The first community college to participate will be LaGuardia Community College in New York City's Queens borough, which houses a Small Business Development Center. The first community development financial institution to receive financing from Goldman Sachs will be New York-based Seedco Financial Services Inc., with loans to businesses in the New York area expected to begin early next year.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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