The nation may be diving headlong into recession, but that's not stopping financial firms from a cherished year-end tradition: the awarding of bonuses.
Wall Street will distribute bonus checks come December because that is how Wall Street works, experts say.
Those checks will be smaller than the big payouts of recent years, however, according to Johnson and Associates, an executive compensation consulting firm, which has released a report estimating that Wall Street bonuses will be down as much as 70 percent compared with 2007.
The number of bankers who will share the bonus pool has also decreased because of layoffs, the report found.
The top executives will likely get paid "primarily in paper," meaning stocks and stock options, according to Alan Johnson of Johnson and Associates. Pay will be down, he said, but there will still be "thousands of people who make millions of dollars."
In the report, he said, however, that "thanks in part to the financial bailouts and mergers we've seen recently, the decline in incentive payments won't be as drastic as first thought."
Goldman Sachs and Morgan Stanley are accepting a combined $20 billion in taxpayer money under the federal economic stabilization plan or the TARP.
According to SEC filings, Goldman Sachs and Morgan Stanley have set aside a combined $11 billion for bonuses in the first nine months of this year, down more than 25 percent compared with last year.
When contacted about this story, most banks refused to comment directly but noted that no decisions had been made about year-end compensation. At least two bank sources told ABCNews.com that while government funding is part of their overall capital pool, it would not be directly used for year-end bonuses.
Johnson, said, however, that "it's not rocket science" to figure out that "it's the same pool of money."
One former investment banker, who asked not be named, said he didn't buy the argument that bonuses aren't coming from government money. He said it was like putting taxpayer money in your left pocket and paying bonuses from your right pocket.
The same banker said that, in recent years, an average managing director at an investment bank may have made $200,000 in salary but received a $1 million to $4 million bonus. It is the bonus, he said, that motivates bankers.
Nearly everyone agrees that Wall Street has a PR problem.
With Wall Street experiencing its worst season since the Great Depression, and with the federal government stepping in to give money to financial institutions, many are asking whether this is the right time to be handing out any bonuses at all. Bonuses, after all, are supposed to reward good performance.
Nine banks at the center of the government plan to ease the financial crisis are under scrutiny: Goldman Sachs, Morgan Stanley, Citigroup, JPMorgan Chase, Wells Fargo, Bank of America (including Merrill Lynch), State Street Corp. and Bank of New York Mellon.
Of the nine, JPMorgan Chase and Wells Fargo are considered to be strong banks. They are widely believed to have been forced into the plan, an apparent attempt by the Treasury to treat all major banks as equals.
Wells Fargo released a statement saying that it didn't need "government money to pay for compensation," adding that the company "earned $1.64 billion in third quarter 2008, $5.39 billion in the first nine months of 2008, and $8.06 billion in 2007."