Nov. 17 (Bloomberg) -- Goldman Sachs Group Inc., the firm that set a record for Wall Street pay last year, became the first U.S. bank to scrap 2008 bonuses for senior officers in the face of the worst financial crisis since the Great Depression.

Chief Executive Officer Lloyd Blankfein, 54, and six deputies told the New York-based bank's compensation committee yesterday that they would forgo the year-end awards, according to Goldman spokesman Lucas van Praag. Each of the executives receives a salary of $600,000; Blankfein's bonus last year was almost $70 million.

``They believe it's the right thing to do,'' van Praag said in a telephone interview. ``We can't ignore the fact that we are part of an industry that's directly associated with the ongoing economic distress.''

Wall Street bonuses, typically about two-thirds of the firms' total annual compensation, are under scrutiny by lawmakers and taxpayers after the U.S. government passed a $700 billion rescue plan for the industry. Banks and brokerages have announced $707 billion of writedowns and credit losses since the subprime-mortgage market collapsed last year, and have cut almost 160,000 jobs. Lehman Brothers Holdings Inc., once the biggest underwriter of mortgage securities, was forced to file for bankruptcy.

New York Attorney General Andrew Cuomo, who demanded pay information last month from banks that received bailout funds, lauded Goldman for taking a ``step in the right direction.''

Shrinking Revenue

``This gesture by Goldman Sachs is appropriate and prudent and hopefully will help bring Wall Street to its senses,'' Cuomo said in a prepared statement. ``We strongly encourage other banks to follow.''

Citigroup Inc., which today said it plans to cut 50,000 jobs, should follow Goldman's lead, Cuomo said today. ``It would send exactly the wrong message for Citigroup's top brass to collect bonuses while investors, taxpayers and now Citigroup's own employees suffer,'' he said. He added that companies such as American International Group Inc., which have also relied on taxpayer support, should consider bonus cuts.

At Goldman, Blankfein, Chief Financial Officer David Viniar, Co-Presidents Jon Winkelried and Gary Cohn, and Vice Chairmen J. Michael Evans, Michael Sherwood and John S. Weinberg won't receive year-end payouts, van Praag said. In the nine months through August, Goldman's compensation expense dropped 32 percent from last year to $11.4 billion.

Revenue also declined 32 percent in the same period, profits fell 47 percent and some analysts predict the firm will report a fourth-quarter loss.

Record Payouts

Goldman's share price fell $4.24, or 6.4 percent, to $62.49 in New York Stock Exchange composite trading, the lowest since 2002. The firm's stock is down 71 percent so far this year.

Earnings at Morgan Stanley fell in the same period, while Merrill Lynch & Co., which runs the biggest U.S. brokerage, and Citigroup, the nation's fourth-largest bank, haven't posted quarterly profits since 2007. All the firms are based in New York.

Morgan Stanley CEO John Mack, who received a $40 million bonus in 2006, didn't take an award last year after his firm reported its first quarterly loss. The investment bank, whose stock is down 77 percent this year, will decide on 2008 compensation in the next two weeks.

Goldman paid record-setting 2007 bonuses to Blankfein, Cohn, 48, and Winkelried, 49, awarding more than $65 million to each after the company reported the biggest profits in Wall Street history. Viniar, 53, the CFO, received more than $56 million as a bonus last year.

Deutsche Bank, UBS

``These senior executives have made a lot of money historically, so not getting a bonus for one year is not going to affect them like someone at a lower level,'' said Jeanne Branthover, managing director at Boyden Global Executive Search, a recruiting firm in New York. ``It will free up cash to give to people that they want to retain because there's still a war for talent.''

Goldman isn't the first financial firm to rein in bonuses this year. Deutsche Bank AG, Germany's biggest bank, said in October that CEO Josef Ackermann and investment banking chiefs Anshu Jain and Michael Cohrs won't receive the payouts.

UBS AG, Switzerland's biggest bank, said on Nov. 2 that CEO Marcel Rohner, his 11 colleagues on the executive board and Chairman Peter Kurer will not get bonus payments for 2008. Today the Zurich-based company said Kurer will no longer receive any variable compensation as the bank adopts a new pay system for top management in 2009.

Bank Holding Company

UBS, which has received a $59.2 billion aid package from the government and the central bank, will be able to take back parts of bonuses allocated to executive board members, divisional management and some other employees in the years after the initial award, the company said in a statement today. Shareholders will have an advisory vote on the new model starting next year.

Goldman, which converted from the largest U.S. securities firm into a bank holding company in September, is one of nine U.S. banks that received a total of $125 billion in the first stage of the $700 billion aid plan. U.S. Representative Henry Waxman, a California Democrat, and Cuomo, also a Democrat, have called on the nine companies to provide information on their pay plans.

``The image of New York investment bankers has been that they will take money no matter what,'' Branthover said. Goldman ``is saying we understand, we take it seriously, we are going to do what's right and we will be accountable,'' she said.

A survey of 800 U.S. voters conducted last month by Public Strategies Inc., an Austin, Texas-based public relations company, found that 79 percent had an ``unfavorable'' opinion of the CEOs of major U.S. banks and that 85 percent thought they were paid more than they deserved. About two-thirds of the people surveyed supported the establishment of government guidelines for executive compensation.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.

Last Updated: November 17, 2008 17:11 EST