CORRECTED - UPDATE 4-Goldman profit and pay surge in blowout quarter

(Correcting rise in Goldman shares on Monday to 5.3 percent from 2 percent, in 9th paragraph)

* Trading revenue nearly doubles

* $6.65 billion set aside for compensation

* TARP repayment results in $426 million charge

* CFO says "hard to know" if Q2 results sustainable

* Shares little changed in midday trading (Adds Viniar comments from interview)

By Steve Eder and Joe Giannone

NEW YORK, July 14 (Reuters) - Goldman Sachs Group Inc (GS.N) said quarterly earnings surged 33 percent on blowout trading results, trouncing expectations and putting the bank on pace for windfall bonuses that could draw more unwanted public scrutiny.

The results continued Goldman's extraordinary rebound from the near meltdown of the U.S. banking industry last fall.

Just nine months after the U.S. Treasury bailed out the nation's largest banks with $125 billion of taxpayer money, Wall Street's biggest surviving securities firm topped forecasts as improving markets fueled trading profits.

Goldman also blew the lid off compensation. It set aside $6.65 billion for salary, bonuses and benefits in the quarter, up by nearly half from the quarter ended in May last year.

That puts the average Goldman employee on pace to earn more than $900,000 this year. Chief Executive Lloyd Blankfein, senior officers and star traders will likely receive tens of millions of dollars.

The U.S. government wanted "to make sure that the banks are making money, so they do make money," said Francis Campeau, a broker at MF Global Canada in Montreal. "The flip side is now one could argue they're making too much."

Goldman reported net income for common shareholders of $2.7 billion, or $4.93 a share. That compares with $2.05 billion, or $4.58, in the quarter ended May 30, 2008, before the bank switched to a calendar-year schedule.

Analysts on average had forecast earnings of $3.49 a share, according to Reuters Estimates.

Goldman shares were fractionally lower in midday trade after rising 5.3 percent on Monday. The shares are up nearly 80 percent this year, compared with a 24 percent rise in the NYSE Arca Securities Broker/Dealer index .XBD.