By Tom Braithwaite in New York

Lloyd Blankfein, chief executive of Goldman Sachs, said weaker economic growth and tougher regulation did not mark a permanent shift in financial markets and an upturn ?may have already started?.

Goldman last month reported only its second quarterly loss since it became a public company in 1999. Analysts are worried that Wall Street?s famed profit-generating machine might be damaged irrevocably by new regulations that curb proprietary trading and bilateral trading of derivatives, and by the global slowdown fuelled by the eurozone crisis.

At one of his few public appearances, Mr Blankfein suggested Goldman?s target of a 20 per cent return on tangible common equity might be reduced but said that the bank?s executives had not yet calculated a new target – ?regulation will be very important?.

But he added that corporate customers had more to lose than bankers from regulations that crimped market liquidity. He predicted they would push the government to step back from draconian rules.

?It?s users and consumers in the market that have to deal with different margin requirements . . . have to deal with unfortunately and inevitably higher cost in managing their portfolios . . . and have to pay the price for the higher cost of holding inventories,? he told the Bank of America Merrill Lynch conference.

But Mr Blankfein said it was not possible to ?conclude that the slowdown is secular rather than cyclical?. He said earlier this year when Morgan Stanley reported an increase in its ?value at risk?, a measure of risk appetite and potential trading losses, Goldman had been ?lonely? in taking the opposite approach. ?We decided that discretion is the better part of valour.?

But even though that decision had proved correct as the economy worsened and MF Global, the broker-dealer, collapsed after taking a big bet on eurozone debt, Goldman?s conservative approach did not extend ?infinitely? and ?not forever?.

He said repeatedly that Goldman was aligned with it clients. The bank has been accused by lawmakers and the Securities and Exchange Commission of betting against clients in the way it structured and sold structured credit products in the run-up to the crisis.

? The Financial Times Limited 2011