Now Goldman Sachs boss takes potshot at bonuses

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The Independent Online

The chief executive of Goldman Sachs yesterday called the mounting public fury over bankers' pay "understandable and appropriate".

Speaking at a conference in Hamburg Lloyd Blankfein said: "There is little justification for the payment of outsized discretionary compensation when a financial institution lost money for the year."

He also called for a blanket ban on multi-year guaranteed bonuses, saying they were "bad for the long-term interests of our industry and the financial system". Mr Blankfein said that all but the most junior employees should receive the majority of their compensation in stock and that rewards should be linked to the performance of a bank as a whole rather than just an individual's own profit and loss account.

He further criticised some of the products hawked by banks in the run-up to the ongoing financial crisis as socially useless, saying: "The industry let the growth and complexity in new instruments outstrip their economic and social utility as well as the operational capacity to manage them.

"As a result, operational risk increased dramatically and this had a direct effect on the overall stability of the financial system."

The comments echo similar views expressed recently by Lord Turner, chairman of the Financial Services Authority. There has been mounting anger over bankers' pay in recent weeks with critics arguing that they have been allowed to slip back into old habits.

Mr Blankfein expressed board support for global efforts at regulatory reform and said watchdogs should work more closely together and ask harder questions of the banks.

But rival companies – some of which have used multi-year guarantees to attract staff amid a renewed hiring spree – gave a cynical response.

A banker at a rival firm summed up the feelings of many when he said: "It's totally self-serving and I notice he's saying it in Franfurt rather than New York."

Goldman Sachs – nicknamed "the firm" – has been the subject of some sharp criticism in recent weeks over the role it played leading up to and during the financial crisis.