RESPONSE OF GOLDMAN SACHS BANK USA TO COMMENT LETTER SUBMITTED BY INNER CITY PRESS/FAIR FINANCE WATCH, OCTOBER 14, 2015 Goldman Sachs Bank USA (“GS Bank”) hereby submits its response to the comment letter, submitted on September 19, 2015 (the “Comment Letter”), by the Inner City Press’s Fair Finance Watch (“FEW”). The Comment Letter relates to the application (the “Application”), dated August 19, 2015, by GS Bank, a New York state-chartered member bank, to the Board of Governors of the Federal Reserve System (the “Board”) for prior approval to acquire by purchase and assumption certain deposit liabilities and certain very limited non- financial assets of GE Capital Bank, a Utah state-chartered non-member industrial bank, pursuant to the Bank Merger Act, 12 U.S.C. § 1828(c) (the “Bank Merger Act”). GS Bank received the Comment Letter from the Federal Reserve Bank of New York (“FRBNY”) on October 2, 2015. Capitalized terms used herein and not otherwise defined have the meaning set forth in the Application. GS Bank does not believe the Comment Letter raises substantive issues within the scope of the statutory factors set forth for Board consideration under the Bank Merger Act nor does it identify any genuine dispute of facts that would be material to the Board’s decision and ‘merit the need for a public hearing. Further, as the Board has stressed, a hearing is unnecessary ‘when, as in the case of this Application, the requesting party has already had the opportunity to submit written comments. Following the submission of the Comment Letter, the public ‘comment period on the Application was extended through October 30, 2015; therefore, GS Bank believes all parties will have sufficient opportunity to submit written comments. 1. Goldman Sachs’ “Limited” CRA Program A. GS Bank's Community Reinvestment Act (“CRA”) Record and Status FFW again alleges that GS Bank’s CRA program is insufficient for purposes of the Proposed Transaction. GS Bank believes that the public version of the Application sufficiently deseribes its CRA program and that its rating and record satisfy applicable requirements under the CRA. In the interest of transparency and clarification, GS Bank further expands upon its CRA program below. GS Bank also notes that the FRBNY’s CRA evaluation for its most recent examination period will be made publicly available, consistent with regulatory requirements, GS Bank maintains a comprehensive community development program that makes loans and investments in its CRA assessment areas, as well as in other areas of need around the country. Further, Goldman Sachs, together with its affiliates, including GS Bank, ‘work with community-based and public sector partners to invest in projects that revitalize ies and meet critical community needs. As noted in the Application, GS Bank's impact investing work has been acknowledged by its regulators. GS Bank received CRA ratings of “Outstanding” from the New York State Department of Financial Services and the FRBNY in its last two CRA Public Evaluations, dated November 5, 2012 (the “2012 CRA Performance Evaluation”) and September 13, 2010. Based on publicly reported CRA exam results, only approximately 8.5% of banks examined in 2012 and 9.1% of banks examined in 2010 receivedigs of “Outstanding.” In the FRBNY’s 2012 CRA Performance Evaluation, GS Bank was acknowledged for providing “a high level of community development loans, community development services, or qualified investments, particularly investments that are not routinely provided by private investors.” The FRBNY also noted that, “[w]hen compared to nine similarly-situated wholesale banks operating in GS Bank’s assessment areas, GS Bank’s total level of annualized community development loans and quslified investments as a percent of average assets compared very favorably.”* GS Bank has demonstrated a strong CRA record, particularly focusing on the areas that are representative of the business expertise and skillset that it believes can make a difference in communities. Based on this record, GS Bank respectfully submits that the request for itto submit a CRA plan as a condition to regulatory approval should be denied, B. GS Bank’s CRA Program As noted in the Application, GS Bank’s CRA program is primarily implemented by GS Bank’s impact investing unit, the Urban Investment Group (“UIG"). Since The Goldman Sachs Group Inc. (“Goldman Sachs”) became a bank holding company in 2008, GS Bank and its affiliates have committed more than $4.1 billion in loans and investments that have facilitated the creation of more than 14,000 units of housing, the majority of which are affordable for low- and moderate-income families. GS Bank and its affiliates have also financed more than 1,500,000 square feet of community facility space that serves low- and moderate-income communities and individuals, ineluding not-for-profit charter schools and community health facilities, and more than 5,000,000 square feet of commercial, retail and industrial spaces that revitalize and create jobs in low- and moderate-income communities.” GS Bank has engaged in substantial activity in its two CRA assessment areas (sections of New York/Northern New Jersey and Utah), focusing on the impact of its investments, as well as the overall volume. Activities in its assessment areas include: © New York City, New York: GS Bank and its affiliates have committed more than $2.1 billion to nearly 100 projects in New York City, in all five boroughs, resulting in thousands of affordable housing units, 2.2 million square feet of retail and commercial space, expanded healthcare and community facilities, and job creation. ‘See Federal Financial Institutions Examination Council Interagency CRA Rating Search (available a hhup:/www ffiec.gov/eraratings/default aspx). nuit ‘Act Performance Evaluai an Sachs Bank SSD No. 21827 p. I, dated November 5, 2012 (available at htp:/www.newyorkfed.org/banking/cra_pes/2012/ 2182786 pf). > dat. 3. ‘These numbers are intended to illustrate what has been done by Goldman Sachs since it became a bank hholding company. For the avoidance of doubt, these amounts were included in the aggregate volumes of impact investing activities committed by Goldman Sachs noted in the ApplicationNewark, New Jersey: With more than $400 million invested across 15 projects, GS Bank and its affiliates’ impact investing efforts in ‘Newark have resulted in more than 900 units of housing, six nonprofit charter schools serving more than 2,500 students, and much needed retail space and community facilities. Salt Lake City, Utah: GS Bank and its affiliates are leading impact Westors in Utah, having invested more than $600 million in projects that focus on improving low- and moderate-income communities, including thousands of affordable housing units, new charter schools, innovations in early education, new community facilities, and access to capital and business education for small businesses. GS Bank targets considerable resources outside its assessment areas, supporting a wide variety of development and rev ization projects in partnership with community-based not-for-profit organizations, mission-based for-profit developers, and public-sector partners. Examples of areas where GS Bank and its affiliates targeted resources includ ‘ew Orleans, Louisiana: GS Bank and its affiliates have made substantial investments in New Orleans of more than $300 million to date as part of the recovery effort post-Hurricane Katrina. These investments have provided more than 1,450 units of critically needed housing, more than 1,300 new jobs, services to low-income residents, and access to capital for underserved small businesses. Philadelphia, Pennsylvania and Camden, New Jersey: GS Bank and its affiliates have recently begun investing in Philadelphia and Camden. More than $85 million has already been committed to date and additional investments are under active consideration, These investments revitalize neighborhoods, increase access to ‘educational opportunities, and increase access to credit for Underserved small businesses in the region. Impacts include more than 550,000 square feet of retail, commercial and residential space, including a state-of-the-art educational facility currently serving 750 students in one of Camden’s most distressed neighborhoods. In addition to investing significant financial resources in communities, Goldman Sachs greater impact. s also a leader in creating innovative new programs, approaches and models to achieve 10,000 Small Businesses: One example of such a program is 10,000 Small Businesses (“LOKSB”), which helps entrepreneurs create jobs and economic opportunity by providing greater access to education, capital and business support services. Through 10KSB, Goldman Sachs partners with community colleges andmission-driven lenders, targeting business owners who would not, otherwise have access to continued business assistance.’ 10KSB is 2 $500 million program to help small businesses create jobs and drive economic growth in their local communities. 10KSB has reached more than 4,600 business owners in the U.S. and has demonstrated success in generating revenue and employment growth for business owners. In addition to achieving these impacts on revenue and employment growth for the small businesses that participate in the program, Goldman Sachs’ investments through 10KSB have also expanded the capacity of program partners such as community colleges. As part of 1OKSB, GS Bank has also made significant investments in Community Development Financial Institutions (“CDFIs") around the country that play an important role in meeting the credit needs of underserved small businesses. As part of the total 1OKSB commitment, GS Bank has invested more than $165 million in CDFls and other mission-driven small business lenders. Goldman Sachs and the Goldman Sachs Foundation have also provided more than $23 million in grants to the program’s capital partners for loan loss reserves and capacity building to help these lenders reach more businesses, in addition to providing $2 million in technical assistance programs to help strengthen other CDFls across the country. 1OKSB was highlighted in GS Bank's 2012 CRA Performance Evaluation as an “innovative and responsive measure to address community development needs.”° © Goldman Sachs Gives (“GSG"): Goldman Sachs makes grants through a donor-advised fund for current and retired senior employees that is focused on supporting underserved communities and constituencies through investments that address major challenges and advance nonprofit leaders worldwide. Since 2010, GSG has made more than 19,000 grants in the U.S. totaling more than $800 million that have supported more than 3,400 non-profit organizations engaged in education, social service and other community-related activities. * Social Impact Bonds (“SIBs"): Goldman Sachs has been a pioneer in utilizing this innovative financial instrument to leverage private financing to expand high-i financed four of the eight SIB deals in the U.S. market, including transactions in New York, Salt Lake City, Boston, and Chicago. A list of 10KSB partners to date is attached hereto as Exhibit A, 2012 CRA Performance Evaluation at p. 4.‘These investments finance programs that are typically out of scope for CRA investors, such as early education and programs aimed at sm. SIBs have received significant attention as a promising solution for budget-constrained state and local governments seeking to fund these programs. ‘The United Way of Salt Lake and partners on the Utah Early Education SIB recently announced initial results from the country’s first SIB transaction for early childhood education, in which Goldman Sachs is the senior lender. A copy of this announcement is attached as Exhibit B. The initial results show that both the preschool intervention and the SIB financing mechanism were successful, generating savings for school districts and government entities and triggering the first investor payment for a SIB in the U.S. market, * Goldman Sachs Social Impact Fund (“GS SIF"): Goldman Sachs created the GS SIF to help expand the community development finance market by 1g new private mission-oriented investors to the field. The GS SIF demonstrates to a new class of investors the viability of an investment strategy that creates real impact in communities while generating a financial return. The GS SII cone of the first domestic impact investing vehicles launched by a major financial institution, and is among the largest in the United States. The GS SIF has made investments in projects and programs in New York, Newark, Boston, Detroit, Philadelphia and Chicago. GS Bank is proud of the work it does in fulfillment of its CRA obligations. While its CRA ratings are extremely important, GS Bank is most proud of the leadership role it has embraced in making a real impact on communities everywhere it does business. Goldman Sachs’ impact investing business is part of a broader commitment to help bring economic growth, stability and opportunity to communities. In addition to the foregoing, as noted in the Application, Goldman Sachs operates its Community TearnWorks program, whieh is a global volunteer initiative that enables the employees of Goldman Sachs to take time each year to volunteer with a number of local nonprofit organizations, 2. Concerns about how the Application was made available to the public A. Scope of Redactions FFW again expresses concerns regarding the scope of redactions to the Application. GS Bank has provided a new public redacted version of the Application and subsequently disclosed additional information contained in the Application, exhibits and related materials. ‘The remaining redactions inelude nonpublic information about both parties to the transaction, the disclosure of which would reveal to their competitors their internal strategies, transactions and competitive positions, and would place each party to the transaction at a &competitive disadvantage with respect to its competitors who do not publicly reveal such information. GS Bank, therefore, has requested confidential treatment of this information pursuant to the Freedom of Information Act and the Board’s regulations.” 3. Relationship between the Federal Reserve Board and Goldman Sachs A Idman Sachs’ Application to become a Bank Hol ing Company FFW again asserts that there was no public comment period or CRA review when Goldman Sachs became a bank holding company in September 2008. In its Order, effective March 11, 2011, approving Goldman Sachs” application pursuant to Section 3 of the BHC Act to retain 9.8% of the outstanding common stock of Avenue Financial Holdings, Inc. (the “Avenue Financial Order”), the Board mentioned that “a commenter noted that the Board waived public notice of Goldman [Sachs’] application to become a bank holding company in September 2008,” further stating that the Board “determined that emergency conditions existed that justified the Board’s expeditious action” on the application.* Although the regulations of the Board allow the Board to “take into consideration the substance of comments with respect to an application,” the Board’s Regulation Y states that a comment is not considered substantive if it raises previously considered claims or irrelevant issues."” ‘Therefore, GS Bank submits that this comment is not “substantive” (as such term is used in Regulation Y) because it was previously asserted and taken into consideration by the Board. B. Relationship between Goldman Sachs and Individuals at the FRBNY. FEW states that the audio tapes released by former FRBNY examiner Ms. Carmen Segarra, which allege bias by the FRBNY, require a public hearing. FFW does not provide, however, any basis for this assertion and such tapes have been in the press since September 26, 2014. FFW further states that the previous employment of William C. Dudley, Robert Kaplan and Patrick Harker at Goldman Sachs, as well as the resignation of Stephen Friedman, who served on the board of Goldman Sachs, from the FRBNY raises transparency concerns and requires a public hearing. GS Bank notes that the decision on the Application will be made by the Board and not by the FRBNY or any other Federal Reserve Bank. ‘The facts related to ail these individuals’ employment with Goldman Sachs are publi ‘See 5 U.S.C. § 552, and the regulations promulgated by the Board pursuant thereto, 12 CER. Part 261 The redacted information includes nonpublic commercial or financial information that GS Bank believes is privileged or confidential within the meaning of Section 261.14(a)(4) of the Board’s regulations or that is ‘otherwise exempt from disclosure under Section 261.14(a) ofthe Board's regulations, ‘The redacted information has not been, and is not required tobe, publicly disclosed. * See The Goldman Sachs Group, Inc.,97 Fed. Res. Bull, 22 (June 2011), 1.3 and 5 (citing The Goldman ‘Sachs Group, Inc., 94 Fed. Res. Bull. C101 (September 2008), " I2CFR.§ 262.3(6). 1 See 12 CFR, § 225.16(6)3).4. Accusations of “predatory practices” in the mortgage field and municipal finanee FFW again makes accusations of “predatory practices” in the “mortgage field” and “municipal finance,” and states that there are a number of compliance settlements that must be reviewed in connection with the Application. FFW has previously asserted claims of predatory lending in its comment letter in connection with the 2009 Applications which were approved by the Board. GS Bank submits that such comments are not substantiated by specific arguments or facts, and believes these issues are outside the scope of the statutory factors for Board consideration under the Bank Merger Act. 5. List of news articles about Goldman Sachs’ lawsuits, settlements, and other events FFW again references several articles related to lawsuits, settlements and other events, all but one of which involve Goldman Sachs but not GS Bank. GS Bank respectfully submits that such comments are not substantiated by specific arguments or facts. GS Bank notes that none of the articles relate to GS Bank itself, and believes these issues are outside the scope of the statutory factors for Board consideration under the Bank Merger Act. 6. Request for Public Hearing and to Extend the Comment Period ‘The Comment Letter requests an extension of the public comment period. The Proposed Transaction was publicly announced on August 13, 2015. On October 5, 2015, the Board extended the comment period to October 30, 2015 to “allow interested persons more time to review the proposal and to provide comments on the application in light of the standards the Board must consider in reviewing the proposal under the Bank Merger Act.”'! GS Bank respectfully submits that any request to extend the comment period beyond October 30, 2015 should be denied The Comment Letter requests a public hearing based on the above allegations. However, GS Bank respectfully submits that FFW’s allegations do not merit a public hearing. The Board’s Rules of Procedure provide for the possibility of informal public hearings or meetings on applications.” Persons commenting on an application (including FFW) often request a public hearing and the Board will deny such requests, absent compelling circumstances of a type not raised here by FFW.' As the Board has stressed, a hearing is unnecessary when, as in the case of this Application, the requesting party has already had the opportunity to submit written comments; the requesting party fails to identify any genuine dispute about facts that would be material to the Board's decision; and a public hearing is not necessary to clarify the factual record of the proposal.'* ‘As noted above, GS Bank does not believe the Comment Letter raises substantive issues or genuine disputes of fact. GS Bank has an established CRA program, a positive track Federal Reserve Press Release, dated October 5, 2015, available at hip:/wwww.federaleserve gov/news events/press/orders/20151005: See 12 CER. § 262.3(€), ‘See, eg. Federal Reserve Press Release, dated May 19, 1997, available at htp:/www.federelreserve-g0v ‘Tooaridocs!press/bhe/1997/19970S 19 agerecord in CRA examinations and has noted how, while not required, there will be a public benefit as a result of the Proposed Transaction. Further, FFW has had the opportunity to submit written ‘comments and has not demonstrated why a public hearing is merited to clarify factual disputes or elicit information not otherwise able to be obtained through written comments. In closing, GS Bank respectfully requests that the Board deny FFW’s requests for a public hearing and any further extension of the comment period. Furthermore, GS Bank believes that FFW’s Comment Letter should not negatively affect the Board's decision on the Application.if EXHIBIT A List of Partners in Goldman Sachs’ 10,000 Small Businesses Program Education Partners City Colleges of Chicago (Chicago, IL) ‘Community College of Philadelphia (Philadelphia, PA) ‘Cuyahoga Community College (Cleveland, OH) Dallas County Community College District (Dallas, TX) Delgado Community College (New Orleans, LA) Houston Community College (Houston, TX) LaGuardia Community College (New York, NY) Long Beach City College (Long Beach, CA) Los Angeles City College (Los Angeles, CA) Macomb Community College (Detroit MSA, MI) Miami Dade College (Miami, FL) Oakland Community College (Detroit MSA, MD) Salt Lake Community College (Salt Lake City, UT) Wayne State University (Detroit MSA, MI) CDFIs and Other Mission-driven Lenders Access to Capital for Entrepreneurs (Atlanta, GA) Business Outreach Center Network (New York, NY) Coastal Enterprises, Ine. (Maine) Colorado Enterprise Fund (Colorado) Community First Fund (Pennsylvania) Community Reinvestment Fund (Minneapolis, MN) Craft3 (Oregon / Washington) Detroit Development Fund (Detroit, MI) Growth Capital (Cleveland, OH) Hope Enterprises, Inc. (New Orleans, LA, Gulf Coast, MS) IFF (Chicago, IL) Invest Detroit Foundation (Detroit, MI) Kentucky Highlands Investment Corporation (Kentucky) LiftFund (Dallas and Houston, TX) Montana CDC (Montana and Idaho) Mountain West Small Business Finance (Salt Lake County region, UT) NYBDC (New York, NY) Opportunity Fund (San Francisco Bay Area, CA) Pathway Lending (Tennessee) PeopleFund (Dallas, TX) Philadelphia Industrial Development Corporation (Philadelphia, PA) SomerCor504, Inc. (Chicago, IL) Valley Economic Development Corporation (Los Angeles and Long Beach, CA) Virginia Community Capital (Virginia)EXHIBIT B United Way of Salt Lake Announcement‘ADVANCING EDUCATION INCOME AND HEALTH 10/7/2015, Contact: Austin Isbell, Love Communications 801-631-3256 | aisbell@lovecomm.net Social Impact Bond for Early Childhood Education Shows Success 109 of 110 At-Risk Utah Students Avoid Special Education Services Following High-quality Preschool, Financed by “Pay for Success” Investment from Goldman Sachs and J.B. Pritzker Salt Lake City—Today, United Way of Salt Lake (UWSL) announced that both the preschool intervention and the financing mechanism for the country’s first “Pay for Success” transaction for early childhood education have been successful. The investment deal, in which Goldman Sachs and J.B. Pritzker committed $7 million dollars, will benefit up to 3,700 children over multiple years and save state and local government millions of additional dollars. "This pioneering effort is a perfect example of data-driven Collective Impact with the larger goal of assuring every child is ready for school,” said Bill Crim, President and CEO of United Way of Salt Lake. “When business, government and the social sector work together in this way, large- scale social change is possible.” Of the 595 low-income three- and four-yeat-olds who attended high-quality preschool financed by the social impact bond (SIB) in the 2013-14 school year, 110 of the four-year-olds were identified as likely to-use special education in grade school. Results showed that of those 110 students identified as at risk, only one used special education services in kindergarten. The 110 students will continue to be monitored through sixth grade, generating further success payments based on the number who avoid use of special education in each year, ‘The successful results triggered the first investor payment for any Pay for Suceess financing mechanism in the U.S. market. With fewer children requiring special education services and remedial services after attending the SIB-financed Preschool Program, school districts and government entities are saving money. Total savings calculated in Year | for Cohort I are $281,550, based on a state resource special education add-on of $2,607 per child. Investors received a payment equal to 95 percent of these savings. “Access to early education gives children a foundation they will build upon throughout their education and beyond,” said Andrea Phillips, vice president in the Goldman Sachs Urban Investment Group. “We are pleased that initial results announced today show that the pay for success financing method is working. Through the strong collaboration with local leaders and our partners, children who otherwise may not have been able to attend preschool will get this opportunity and improved educational ‘outcomes will help build stronger communities. Established in 2013 through a partnership led by UWSL, the initiative builds on research conducted by Voices for Utah Children on the Granite School District preschool program, which delivers a high impact and targeted curriculum to increase school readiness and academic performance among three~ and four-year-olds. As a result of entering kindergarten better prepared, fewer children are expected touuse special education and remedial services in kindergarten through 12+ grade, which results in cost savings for school districts, the state of Utah and other government entities. United Way of Salt Lake convened partners and investors to execute the first year and earmarked $1 million to serve as the repayment fund for the transaction’s first cohort of children. Salt Lake County, led by Mayor Ben McAdams, added to the repayment fund and became the first government entity in Utah to embrace the pay for success model. “Putting kids on the path to suecess turns out to not only be the right thing to do, but also the fiscally responsible thing to do, These results show that the Pay for Success model creates an opportunity to put taxpayer dollars towards what actually works, rather than following an outdated recipe that we ‘once thought or hoped would work,” said Salt Lake County Mayor Ben McAdams, In 2014, the Utah State Legislature passed HB96, the Utah School Readiness Initiative sponsored by Representative Greg Hughes. This legislation established the School Readiness Board, comprised of appointees from the State Department of Workforce Services, Utah State Office of Education, Utah State Charter School Board, business leaders, and other individuals committed to advancing early childhood education in Utah “The passage of HB96: Utah School Readiness Initiative in 2014 was the right choice for Utah,” said Speaker of the House, Greg Hughes. “As a lawmaker I want to make sure that our investments are achieving the outcomes we hope for our state, but more importantly, we want to ensure our kids have the opportunities they need to reach their potential.” The Schoo! Readiness Board is responsible for entering into Pay for Success financing contracts with private investors, on behalf of the state. In 2014, the state of Litah entered into a contract with United Way of Salt Lake, Goldman Sachs, and J.B. Pritzker to provide repayment funding for the project for cohorts two through five. “Lam very pleased to see these initial results and the innovative work of the public-private partnership,” said Gov. Gary R. Herbert. “Early education is a critical and real need for our most at risk children and their parents. These programs are proven to help reach the state's critical goal of reading proficiency by the end of third grade and create a lifetime of learning success.” About United Way of Salt Lake United Way is pursuing lasting social change on some of the toughest issues we face—poverty, poor health, and lagging educational achievement. Using a Collective Impact framework—uniting organizations, donors, and volunteers—we are working to change lives and communities forever. We invite you to be part of the change. You can give, you can advocate, and you can volunteer. Together we can do more than help one child beat the odds, we can change the odds for entire communities. Join the conversation by visiting our blog at uwslhub.org, or find out more at uw.org About the Goldman Sachs Urban Investment Group Established in 2001, the Goldman Sachs Urban Investment Group (UIG) deploys the firm's capital by making investments and loans that benefit urban communities. Through its comprehensive community development platform, UIG is a catalyst in the revitalization of underserved neighborhoods. UIG has committed over $4.5 billion, facilitating the creation and preservation of aver 18,000 housing units - the majority of which are affordable to low, moderate and middle-income families - as well as over1,800,000 square feet of community facility space and over 5,500,000 square feet of commercial, retail, and industrial space. ane