Jan. 10, 2010 -- It's bonus season on Wall Street and, as millions of Americans struggle to find work and pay their mortgages, bonus backlash seems inevitable.
"The bonuses for this year, for performance in '09, will be record-busting numbers," says James Reda, an executive compensation consultant.
Christine Romer, head of the White House Council of Economic Advisers, expressed frustration at the idea of big bonuses.
"We've provided extraordinary aid and the idea that, as the financial system heals, the idea that they just go back to business as usual, is simply outrageous." she said on ABC's "This Week" with George Stephanopoulos.
Because banks, such as Goldman Sachs and Bank of America, have paid back the taxpayer money they borrowed, the administration has no authority to limit pay.
Six of the country's largest banks set aside $112 billion for compensation in the first nine months of the fiscal year, and that amount is set to rise when banks announce final earnings reports in coming weeks.
"I think it's un-appetizing to see these people who brought on these problems get rewarded," New York resident Tobey Vass said. "But financial services are a big part of America's economy and they need to remain competitive. If these bonuses aren't paid, you're going to see those jobs go to Singapore, Hong Kong and other part of the world."
Banks are defending their actions, pointing out that this year's bonuses have more strings attached. Many banks, including Goldman and Bank of America, say they are paying their executives in company stock, which, Reda says, "is based on long-term performance."
Compensation packages are also included clauses that allow companies to take back bonuses if bankers' bets sour.
Still, executive compensation experts say the very top tier traders and investment bankers could rake in eight-figure bonuses from 2009 performance.
"It's kind of obscene cause we bailed out the banks," said Bob Joseph, a New Yorker who has witnessed the fallout from the financial crisis. "[But] the good news is … big bonuses are going to be spent in New York."
A Goldman Sachs board member, Bill George, recently explained the big paydays in an interview with the Web site Bigthink.com.
Tough Questions on Bonuses
"People are there to do the job and if you don't pay them for their performance, you'll lose them," he said. "It's much like professional athletes and movie stars."
Babe Ruth did reportedly once say, in response to a question about why he made more than the U.S. president, "I had a better year than he did."
But not all bankers are batting like Babe Ruth.
While it's true that banks profited when the market rallied last year, it was a government bailout and other incentives that made those profits possible. In Washington this week, the heads of four large banks will face a congressional panel that is investigating the causes behind the financial crisis.
They are likely going to face tough questions about these out-sized bonuses.
But the government is limited in what it can do to limit bonuses, and free-market economics dictate that if they don't pay, the best talent may head elsewhere.
"I don't think because it was a government decision to bailout the financial system, which is a major part of our economy, that we should somehow hold it against them now," consultant Reda said. "I think we need to let them go and try to make as much money as they can."