UPDATE 2-Goldman names 94 new partners amid market slump

(Adds Cuomo letter to banks, details, background)

By Joseph A. Giannone

NEW YORK, Oct 29 (Reuters) - Goldman Sachs Group Inc (GS.N) has promoted 94 employees to partner, an exclusive club that gets a bigger slice of the firm's enormous bonus pool, at a time when eye-popping bonuses are under the gun.

Executive pay is expected to shrink as Wall Street suffers through its worst year since the Depression. Bank bonuses are under intense scrutiny as Goldman and dozens of other financial institutions receive government cash injections to help them survive the credit crunch.

Every two years Goldman names a class of managing directors to the exclusive rank of "partner managing director." The system offers about 400 employees the chance to share a fifth of the firm's total compensation pool.

Goldman selects many of its biggest revenue producers, though many are little known. One exception on this year's list is Jan Hatzius, the economist who last year predicted the subprime crisis would lead to a $2 trillion reduction in lending.

The promotions were announced on Wednesday in an internal Goldman memo obtained by Reuters. A spokeswoman for the bank confirmed that the memo had been circulated but declined further comment.

Partners are chosen after a months-long process in which a range of executives throughout the firm review and grade candidates.

With the class named Wednesday, Goldman will have 443 partners. That's an exclusive club for a firm with nearly 30,000 employees and about 1,800 managing directors.

The new class is the smallest since 2004, when Goldman added 99 new partners. At the end of October 2006, when Wall Street was roaring, the bank added a record 115 partners.

Times are tougher this year, with revenue for the first nine months of fiscal 2008 down 32 percent from a year earlier to $23.8 billion. Using rough calculations and past payout ratios, each partner could stand to receive $7 million in compensation.

Last year Goldman paid a record $20.2 billion in compensation and benefits.

That said, these promotions come as regulators and lawmakers demand that Wall Street, which has plunged the economy into recession with its missteps, put a lid on extravagant paychecks. Banks are under intense scrutiny after receiving Federal Reserve funding support and, in the case of Goldman, a direct investment of $10 billion.

Earlier Wednesday, New York Attorney General Andrew Cuomo sent letters to the boards of nine U.S. banks receiving $125 billion of government investments in exchange for preferred shares and stock warrants.

Cuomo, who successfully blocked some executive payments and perks at insurer American International Group (AIG.N), warned that some bank compensation could be found to be illegal.

Last week, Massachusetts Congressman Barney Frank said there should be a moratorium on bonuses.

(To see the memo and the list of partners, go to Reuters "DealZone" here) (Reporting by Joseph A. Giannone; editing by John Wallace)