Friday Links: Smart Money, Rodney King, Dilution

Remember that $500 million program for small businesses Goldman Sachs announced along with its apology earlier this week? It was splashed on C1 of The Wall Street Journal and A1 of The New York Times, which wrote that “the bank said Tuesday that it would spend $500 million — or about 3 percent of the $16.7 billion it has so far set aside to pay its employees this year — to help thousands of small businesses recover from the recession.”

But Smart Money went and checked the numbers. After tax writeoffs and interest earned on loans, the Goldman program will cost it less than a third of that, or about $150 million.

Nice work.

— Cringeworthy lede of the day, in a Wall Street Journal news column:

As Rodney King once said, famously and in a quite different context, “Can we all get along?”

Mr. King, the victim of a police beating in Los Angeles, was referring to race relations, of course. But the same plea now could be applied to relations between the Obama administration and the business community.

Here’s something much better from the WSJ: Some nice reporting on a bit of shareholder unhappiness with Goldman Sachs on compensation.

Despite record net income and compensation at Goldman as markets rebound and the firm outmuscles weakened rivals for business, analysts expect its 2009 earnings per share to be 22% lower than in 2007 and roughly equal to its 2006 earnings, according to Thomson Financial.

That’s because Goldman (an Audit funder) issued 100 million new shares to recapitalize itself, the Journal reports. That had the effect of diluting existing shareholders—but not the pay of Goldman’s bankers.

The New York Times takes a look at the looming problems at the FHA, which has become a sort of lender of last resort for the housing market. Its lending was much better than the private sector’s during the bubble, but it’s still had serious problems. A 3 percent down payment is hardly enough equity to cushion any sort of price decline.

— And Dow Jones’s Michael Rapoport (story is not on the Web) tallies up the number of banks in danger of failing. It’s not pretty: The number has surged 30 percent just since August to 489. The FDIC’s official troubled-bank count comes out next week. And he names some names:

One of the biggest is Frontier Bank, an Everett, Wash., institution with $3.8 billion in assets owned by Frontier Financial Corp. (FTBK). A whopping 25% of Frontier’s loans are nonperforming, and its capital ratios are well below the “well-capitalized” levels—total risk-based capital is 5.35%, a level that regulators consider “significantly undercapitalized.”

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.