Postal worker's son to head world's 'biggest hedge fund'

Lloyd Blankfein has been named as the new chairman and chief executive of Goldman Sachs, making him the most influential banker on Wall Street and putting a former trader in charge of what is increasingly being called the biggest hedge fund in the world.

Currently the president and chief operating officer, Mr Blankfein has long been seen as the heir apparent to Hank Paulson, who was nominated by President George W Bush this week to become Treasury Secretary.

A board meeting yesterday decided not to split the roles of chairman and chief executive, which had been combined under Mr Paulson, despite some commentators worrying that putting too much power in the hands of an executive with a trading background might change the character of the bank. Goldman's investment banking side is defending its position as the leading adviser on merger and acquisition deals.

Mr Blankfein, 51, joined the bank in 1981 as a commodities trader and rose through the ranks to head its entire trading operations, which now account for 66 per cent of Goldman's net revenue. The operations include hedge funds and trading on behalf of clients, but increasingly investing Goldman's own capital in the financial markets, in companies and in infrastructure projects.

His background, though, is far from typical for a Wall Street figure. The son of a postal worker, he was raised in a housing project in the New York borough of Brooklyn. He put himself through Harvard College and Harvard Law School with a combination of scholarships and financial aid.

Mr Blankfein was paid $38m (£20m) last year, almost as much as Mr Paulson and more than any other Wall Street chief executive.

Some clients have grumbled that, since becoming the number two at the bank, he has not spent enough time with investment banking clients, but fans say he retains the sharp wit and decisiveness that comes from his days in the rough and tumble of the trading division.