Lloyd Blankfein, chief executive of Goldman Sachs, yesterday admitted that banks had lost control of some socially useless products they sold in the run-up to the financial crisis and accepted that the furore over bankers' pay was both “understandable and appropriate”.

In a speech to the Handelsblatt banking conference in Frankfurt, Mr Blankfein said: “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.” The message echoes comments by Lord Turner, chairman of the UK's Financial Services Authority, who attracted controversy across the City of London last month when he questioned the social value of much investment banking.

One banker said Mr Blankfein's message was geared to his audience. Many German banks filled their balance sheets with asset-backed securities bought with cheap short-term funding in a strategy that unravelled spectacularly when funding dried up last year. “Germany has an open wound,” said the banker. “Blankfein was clearly trying to placate the locals and show some kind of contrition. But I agree with what he said – these were silly bets and they were absolutely useless.”