Oct. 29 (Bloomberg) -- If Goldman Sachs Group Inc., the most profitable securities firm, decides to make a major charitable donation, it would take “at least $1 billion” to mollify anger over bonuses paid to its employees, billionaire philanthropist Peter G. Peterson said.

Only a donation that size would “have much resonance in the public,” Peterson, the 83-year-old co-founder of Blackstone Group LP, the world’s largest private-equity company, said in an interview in New York yesterday.

Goldman has set aside $16.7 billion for compensation and benefits a year after receiving government aid, triggering criticism from lawmakers who seek to rein in executive pay. The New York-based bank, led by Lloyd Blankfein, is considering a new charitable program and has been working with philanthropy consultant Bridgespan Group after reporting three quarters of rising profit, people familiar with the matter said.

While Blankfein, 55, guided his firm to record earnings in the second quarter and returned $10 billion of taxpayer funds plus dividends, the company still benefits from government guarantees on about $30 billion of debt. It was allowed to become a bank holding company to gain Federal Reserve support and was one of the biggest recipients of funds through the government bailout of American International Group Inc.

“I’m not sure any dollar amount can clear up its image at this point given the reaction we’ve seen, which has been very negative” toward the Goldman philanthropy proposal, Ian Wilhelm, a senior writer covering corporate giving for the Washington-based Chronicle of Philanthropy, said in a phone interview.

‘Bunch of Expectations’

Instead of a large charitable donation, Goldman may also consider paying a special dividend to shareholders, reinvesting its bonus pool in the firm, or just going ahead with the bonus payouts, Peterson said.

“I don’t envy their decision because I’m sure there are a bunch of expectations that have been set up all year among the executives,” said Peterson, who retired from Blackstone in 2008 and created the Peter G. Peterson Foundation with $1 billion of his own money.

Michael DuVally, a spokesman for Goldman Sachs, declined to comment.

Goldman set aside 46 percent more for compensation in the first nine months of the year than it did last year. The amount is enough to pay each worker $527,192 for the period.

The U.S. lost 7.2 million jobs since the recession began in 2007, driving the unemployment rate to its highest level in 26 years.

‘Clawbacks’

Peterson said Wall Street firms need to look for ways to assure the public they’re not making money simply by taking fees from transactions and investments involving other people’s money. Lawmakers may eventually demand methods by which executives pay money back if investments sour after they’ve taken fees.

“There’s something to be said for clawbacks and putting your own skin in the game,” Peterson said. He said he worked on issues related to compensation earlier this decade when he was co-chair of The Conference Board Commission on Public Trust and Private Enterprise, with former U.S. Treasury Secretary John Snow.

Peterson, who created Blackstone with Stephen Schwarzman in 1985, got $1.9 billion in proceeds from New York-based Blackstone’s initial public offering in 2007. His foundation, headed by former U.S. Comptroller David Walker, focuses on educating the public and elected officials about the dangers posed by government deficits, unchecked spending and insufficient savings to the U.S. economy.

‘Rewarding Failure’

Blankfein is facing a series of difficult decisions because Americans will view rising Wall Street compensation as a reward for those who caused the financial crisis, rather than compensation for success, said Peterson, a former U.S. Commerce secretary.

“They look at the huge payments for not rewarding success but failure,” Peterson said. “I don’t know what our friend at Goldman Sachs is going to do, but I have a feeling he’s thinking about this much in the way the president is thinking about Afghanistan.”

To contact the reporters on this story: Patrick Cole in New York at pcole3@bloomberg.net; Jason Kelly in New York at jkelly14@bloomberg.net

Last Updated: October 29, 2009 00:00 EDT