Bob Diamond is head of Barclay's investment bank
Lord Mandelson has launched a personal attack on the president of Barclays, Bob Diamond, branding him the "unacceptable face" of banking.
The business secretary told the Times that Mr Diamond, head of the bank's investment arm, had taken £63m in salary which could not be "justified".
He said he had made the money by "deal-making and shuffling paper around".
Barclays said Mr Diamond had a basic salary of £250,000 and dismissed the £63m figure as "total fiction".
A spokesman added that Mr Diamond took no bonus in 2008 and 2009.
BBC business editor Robert Peston said the pay of top business leaders was "ferociously" complicated.
However, he believed Mr Diamond earned £6m last year from a long-term incentive scheme and £27m from selling his stake in a Barclays-owned business which had been sold.
Barclays, Britain's third largest bank, did not directly receive any money from the UK government but did sell a sizeable chunk to Middle Eastern governments during the financial crisis.
The banking giant saw its full-year profits increase by 92% to £11.6bn ($18.2bn) in 2009.
Lord Mandelson said Mr Diamond had not earned his salary.
Joe Lynam, business correspondent
Peter Mandelson famously said 12 years ago that he was "intensely relaxed about people getting filthy rich as long as they paid their taxes".
Now with a general election just over a month away, the business secretary is less than relaxed about one person - Bob Diamond, the head of Barclays Capital - earning too much money.
While Mr Diamond did not earn £63m in cash last year, he has and will continue to earn enormous sums at Britain's third largest bank.
He can certainly justify being rewarded for his part in the remarkable turnaround at Barclays.
During the financial crisis 18 months ago it needed emergency funding from the Middle Eastern governments of Qatar and Abu Dhabi and went on to post record profits last February of £11.6bn ($18.3bn).
In fact its shares have soared sevenfold since the beginning of last year.
"He's taken £63m not by building business or adding value or creating long-term economic strength, he has done so by deal-making and shuffling paper around," he told The Times.
He made the comments after a number of business leaders backed the Conservatives over their plans to axe part of Labour's planned National Insurance rise if they win power.
The 23 - including the bosses of Marks and Spencer and Next - said the 1% NI increase would be a "tax on jobs" and would "endanger" economic recovery.
Lord Mandelson said the Tories' plans were a "cynical deception" that could not be achieved without increasing VAT.
BBC political correspondent Tim Reid said the business secretary was trying to appeal to the voters with his comments about Mr Diamond.
"He is trying to get the National Insurance story off the front pages by launching a broadside against bankers," he said.
Former Paymaster General Geoffrey Robinson said there was a sense of "moral dismay" among voters at banks continuing to pay massive bonuses to executives after the sector had to be bailed out with taxpayers' money.
"I think the whole country feels this," he told the BBC.
"They are going through a tough time and it is not going to get any easier and we have certain sectors which are doing extremely well - the top end of most businesses and the banks quite egregiously so."
Liberal Democrat shadow chancellor Vince Cable said his party had warned about highly-paid Barclays Capital executives a year and a half ago.
"The issue the Liberal Democrats have been raising is why it's possible for extremely generous remuneration packages to be paid in a bank that has been taking such high risks and which relies on the taxpayers' guarantee," he said.
Meanwhile, Lib Dem leader Nick Clegg said his party would dismiss the boards of directors of Lloyds and RBS if they failed to lend enough money to customers and business.
"It's an outrage that banks have taken billions from taxpayers to bail them out of the consequences of their greed and are now hoarding that money instead of lending it," he said.
"It's time to force the banks to help those who helped them - the millions of taxpayers who bailed them out."