Goldman Sachs Group Inc intensified its public relations counteroffensive on Thursday over fraud charges, as the company's chief executive watched the U.S. president urge Wall Street to back regulatory reforms.

Goldman Sachs Chief Executive Lloyd Blankfein was attending President Barack Obama's Wall Street regulation address, joining Gary Cohn, Goldman's president and chief operating officer, at the speech, a source familiar with the matter said.

In his speech, Obama urged Congress to press ahead with an overhaul of Wall Street regulations and warning about the risks of another financial crisis should safeguards not be in place.

The high-profile appearance by the powerful bank's CEO comes as it has been calling clients and urging them to stay on board after German bank BayernLB cut ties with it.

In a show of support from a high-profile U.S. client, Steve Schwarzman, founder and CEO of Blackstone Group LP, said the giant private equity firm was a major Goldman client and would remain one.

Goldman is seeking to contain the fallout from charges by the U.S. Securities and Exchange Commission over the way it structured and marketed a product tied to subprime mortgages.


Goldman has denied the charge and is calling clients and sending out emails rejecting the accusations.

Goldman says it would never condone one of its employees misleading anyone, certainly not investors, counterparties or clients, according to a person who has seen one of the emails.

Were there ever to emerge credible evidence that such behavior indeed occurred here, we would be the first to condemn it and to take all appropriate actions, the bank said.

Shares in the bank were down 0.7 percent in midday trading on the New York Stock Exchange.

BayernLB said the severity of the accusations against Goldman by the SEC prompted it to cut ties with the investment bank, according to a letter sent by the German landesbank's chief executive and seen by Reuters.

BayernLB had hired Goldman as an adviser to help bolster its capital position as part of restructuring efforts following a bailout.

Even if (SEC) proceedings are still underway, in which the presumption of innocence must prevail, the accusations leveled against your institution are so severe that the Bavarian landesbank, which is itself under close scrutiny and needs to adhere to the highest ethical standards, feels compelled to take this step, the letter said.

BayernLB did not account for a substantial amount of Goldman's business in Germany. Germany accounted for 6 percent, or $995 million, of $16.3 billion in investment banking fees generated by Goldman between 2005 and 2009, according to Thomson Reuters data.

(Reporting by Christian Kraemer in Munich, Alexander Huebner in Frankfurt, Steve Eder in New York and Steve Slater in London; Writing by Edward Taylor; Editing by David Cowell and Gerald E. McCormick)