Goldman Sachs CEO: Financial Crisis 'Deeply Humbling'

The chief executive of Goldman Sachs said on Tuesday that the economic crisis had been "deeply humbling" for financial firms, and that banks receiving taxpayer money need to pay back the funds as soon as possible.

CNBC.com LLoyd Blankfein testifying before House Financial Services Committee

Lloyd Blankfein said Wall Street firms got caught up in the pursuit of profits and ignored risks.

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"Worse, decisions on compensation and other actions taken and not taken, particularly at banks that rapidly lost a lot of shareholder value, look self-serving and greedy in hindsight," Blankfein said at a Council of Institutional Investors conference.

Shares of Goldman Sachs , which kicked off Tuesday lower at $114 on the New York Stock Exchange, advanced during Blankfein's speech and were up about 1 percent near $118.

In a wide-ranging speech that was interrupted by protestors more than once (see accompanying video), Blankfein also called for new standards on how Wall Street executives are compensated and new regulation of large hedge funds and private equity funds.

Blankfein said lessons from the financial crisis include the need to "apply basic standards to how we compensate people in our industry" and to set forth specific guidelines on pay.

He suggested a handful of guidelines, including only junior employees being paid mostly in cash and that the percentage of pay awarded as company stock increase significantly along with a worker's total compensation.

Blankfein also said unregulated pools of capital that are big enough to potentially burden the financial system in a crisis should be put under "some degree" of government oversight. Those would include large hedge and private equity funds.

Throwing regulatory reins around hedge funds—which largely escape government supervision and draw hundreds of millions of dollars from pension funds, charities, university endowments and wealthy individuals—is a central notion in efforts to revamp the nation's financial rule book spurred by the global economic crisis.

The Obama administration recently presented a plan to Congress that would require larger hedge funds, and other private pools of capital like private equity and venture capital funds, to register with the Securities and Exchange Commission. Such a move would open their books to federal inspection.

"Much of the past year has been deeply humbling for my industry," he said, acknowledging it could take years to rebuild the investor confidence lost in the crisis caused partly by industry practices that appear "self-serving and greedy in hindsight."

The Council of Institutional Investors is a group representing public, corporate and union pension funds that together have an estimated $3 trillion in assets.

New York City-based Goldman Sachs said recently it hopes to return its $10 billion investment from the government under the financial bailout program as soon as possible.

- Reuters and the Associated Press contributed to this report.

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