Reportedly, Goldman Sachs (NYSE: GS) staff will be receiving the largest bonus payouts in the company's 150-year history, thanks to a solid first half of 2009. This news has kicked off a bit of concern that large investment banks that survived the credit crunch would hamper any attempts at financial regulation reforms. The main reason that Goldman Sachs was able to perform well in the quarter was a general lack of competition and a surge in revenue thanks to the company's trading of foreign currency, bonds, and fixed-income products.

A week ago, the London staff of Goldman Sachs was told that they could expect larger bonuses -- as long as the company's predictions for its most profitable year ever come to fruition. Next month's second-quarter earnings report are expected to show a jump in profits. An example of how strong the quarter was, Warren Buffet spent $5 billion to purchase GS shares in January -- and the Oracle of Omaha has made $1 billion on this investment.

When the history of this financial crisis is written, this story story will be a contender as a standout example of its kind. It is one of the slickest, under the table, sleight of hand deals ever.

Picture this. The financial markets are falling apart right and left. Lehman, Bear Stearns and Merrill are going down for the count. In the midst of this confusion Bank of America Corp (NYSE: BAC) is in the process of taking over Merrill Lynch. Merrill executives and employees are in a state of panic but at the last moment they regain their composure and have the audacity (word is too mild) to pay themselves $3.6 billion in bonuses just days before the BofA takeover.

Connecticut Attorney General Richard Blumenthal has been pawing through the data on American International Group's (NYSE: AIG) post-bailout bonus payments, and he's uncovered a bit of a discrepancy. Blumenthal says that the bonus payments totaled $218 million -- more than 30% higher than the widely reported $165 million figure.

Blumenthal said he isn't sure of the reason behind the discrepancy, and AIG denies that the discrepancy exists. Either way, Blumenthal isn't happy about it.

Suddenly, I have found myself playing the role of Don Quixote tilting at the windmills of poor executive decisions. I didn't intend to play this role, but the inhabitants of boardrooms and the corner offices are making the job so easy.

The latest example of poor decisions and announcement comes courtesy of Macy's (NYSE: M). The retailer announced on Monday that it would lay off roughly 7,000 workers and cut its dividend in half in hopes of saving money. So, what is the next announcement that the company makes? If you guessed performance bonus payments to executives, give yourself a pat on the back.

Ohio-based regional bank Huntington Bancshares (NASDAQ: HBAN) reported today a series of drastic measures meant to reduce costs by $100 million in 2009. Huntington will cut 500 jobs, or about 4% of its workforce; freeze salaries at 2008 levels; eliminate executive and incentive awards for 2008; and discontinue the company's 401(k) match contribution.

"It is important that our customers and shareholders know that we are well-positioned to deal with this challenging environment," said Chairman, President and Chief Executive Officer Stephen Steinour in a statement. "Our liquidity position is strong."

Over the past 12 months, shareholders in Ambac (NYSE: ABK) have lost more than 90% of their investments as the bond insurers ill-advised forays into structured finance have resulted in massive losses.

But for some reason the company's compensation committee deemed that performance worthy of $3 million in bonuses for 4 of Ambac's top executives. The company's latest proxy statement shows that CFO Sean Lenorard received a $950,000 cash bonus and Executive Vice President Douglas Renfield-Miller got $550,000. Chairman Michael Callen received $975,000 and Chief Executive Officer David Wallis took home $500,000

With public indignation and Congressional outcries building concerning large Wall Street bonuses while the U.S. taxpayer bails out the same industry that contributed to the financial crisis, efforts to limit or eliminate excessive compensation may hinge on whether the Obama administration wants to use political capital to do it.

The public attention-grabbing incidents are certainly there to keep the U.S. Congress focused on the issue: Wall Street allocating its sixth-highest level of bonuses during the investment banking sector's worst year since the Great Depression. Former Merrill Lynch CEO John Thain's decision, since reversed, to use $1.22 million in company money to redecorate his office, is one example. Another is Robert Rubin receiving more than $100 million in compensation from Citigroup (NYSE: C), a bank that's receiving hundreds of billions of dollars in government guarantees and other, direct financial assistance.

One of the questions that I spent this week discussing is this: What was Wall Street thinking? Whether it's using taxpayer money to pay itself $18.4 billion in bonuses or to buy a $50 million corporate jet after posting $35 billion in losses, people are wondering whether Wall Street gets it. The answer is yes. Wall Street gets that nobody stopped it from paying bonuses when it took our money, so it took what it could. Unless we limit how Wall Street spends taxpayer money, it will keep paying itself big bonuses.

Wall Street is a place where the people at the top are trained to grab as much as they can out of the hands of the other graspers. At least $200 billion worth of TARP money went to Wall Street with no strings attached. If you put that much money into the hands of a culture that believes firmly in taking what it can get -- it usually pays half of its revenues to employees -- you end up with Wall Street taking as much as it can from the taxpayers.

President Barack Obama is expressing outrage over the $18.4 billion in bonuses recently paid out by Wall Street banks, using phrases like "the height of irresponsibility" and words like "shameful."

"There will be time for them to make profits, and there will be time for them to get bonuses," he said. "Now is not that time."

He's completely right: It is indeed shameful that these banks are paying any bonuses at all while they beg for government money and send their shareholders to the poorhouse. But the fact is that the United States government had an opportunity to put stiffer limits on bonuses before it started handing out the TARP money and decided not to do that. So what do people expect? We know that America's banks are managed poorly by arrogant and entitled bureaucrats.

Former Merrill Lynch CEO John Thain's decision to spend $1.22 million to redecorate his office will probably put the issue of executive compensation limits back in play for the U.S. Congress, most likely for only bailout fund recipient companies, but quite possibly for other business arrangements, as well.

The compensation issue was considered politically dead for this year, but Thain's audaciousness could serve as the type of catalyst necessary to get a controversial bill through a review process that's designed to defeat or delay legislation. Thain was put in charge of Merrill's trading, investment banking, and brokerage operations after the Bank of America (NYSE: BAC) acquired Merrill.

Further, Thain's $1.22 million splurge of the company's money is the type of action voters will notice, prompting them to place pressure on U.S. Representatives and U.S. Senators to act. Thain's gratuitous redecorating has surfaced alongside Merrill's distribution of bonuses despite massive losses at the former investment banking and brokerage giant.

Board of directors oversight?

Some will argue that executive and employee compensation is a matter for a corporation's board of directors, not the U.S. Congress. Economist Peter Dawson said that's precisely the reason Congress should intervene.

The typical American's tolerance for federally rescued banks and other institutions that continue to award bonuses? Very little.

Three-quarters of Americans say Goldman Sachs (NYSE: GS), Citigroup (NYSE: C) and other bailed-out and taxpayer-assisted companies should cancel all bonuses this year, a new Bloomberg News / Los Angeles Times poll shows.

Further, a majority of respondents also said the U.S. government should have a voice in how these companies are managed, while two-thirds favor tighter financial sector regulation. The poll was conducted December 6-8.

Economist Richard Felson said it's understandable that Americans would express concern about bonuses in financial institutions that accepted federal assistance.

"Awarding bonuses does send the wrong signal. It's also arrogant in the view of many citizens. In our nation, hundreds of thousands of taxpayers are being laid-off with no federal assistance to cushion their loss of income, and down the street a bank executive of a bank who received federal bailout money could be collecting a $300,000 bonus. It gives the appearance of the federal government paying for these bonuses . . . paying for large compensation despite these business flops," Felson said. "It's an arrogant and incorrect policy."

Bonuses for a U.S. Government-rescued Wall Street should take on a 'slightly' leaner tone, according to a sampling of U.S. taxpayers by Bloomberg News. The taxpayers' judgment regarding how large the bonuses should be? Zip. Nothing. Nada. Niet.

Wall Street, which created many of the Frankenstein-like financial instruments that either distorted and/or hid loan risk, and also in some cases encouraged the issuing of problematic mortgage forms, is not justified in paying bonuses, and certainly should not award them following the government's massive $700 billion bail-out of the industry, a sampling of U.S. taxpayers indicated.

One U.S. resident, Ken Karlson, a 61-year-old Vietnam War veteran who lives in Illinois told Bloomberg News, "I may not understand everything, but I do understand common sense." He added, "the bailout money should not have been given to them in the first place."

Economist Richard Felson told BloggingStocks Tuesday acrimony from U.S. citizens is not outlandish or unreasonable given the facts to-date of the current financial crisis.

I've never gotten a signing bonus. In my 20 years of work since graduating from college, I've been hired for seven full-time positions and it never really occurred to me to ask for one. Usually I was happy to get the position -- a new challenge! -- and a salary increase.

So, it grated a bit when l read about bankers at the defunct Lehman getting signing bonuses to stay at firms that acquired their divisions in bankruptcy proceedings. The Financial Times reported that Nomura, which bought Lehman's European and Asian divisions, gave bankers cash equal to last year's bonus if they agreed to stay at Nomura for a year, for example. The article covered a "scramble for talent" that took place when all those Lehman execs were suddenly available for hire.

Bank of America is also reportedly promising Merrill Lynch brokers a bonus as big as as 100% of the revenue they generate to stay after the deal is closed -- even though the sale was done to avert Merrill's demise.

Apparently even undergraduates are still getting signing bonuses when hired at investment banks, according to web site Banker's Ball. The average salary posted in the comments is about $60,000 with a $10,000 signing bonus (plus a target $30,000 or $40,000 year-end bonus depending on the position).

Wall Street walked into the path of its own oncoming stupidity. Of the $700 billion in Treasury rescue money, as much as $70 billion could go to bank and brokerage bonuses.

According to The Guardian, "Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year." The paper goes on to say that the Morgan Stanley (NYSE: MS) pool is large enough to buy the entire company when its stock was at a recent low.

Although this information get filed under "things you can't make up," it will probably have such a severe backlash that Congress will run hearings until the bankers have exhausted the extra money they are making on legal fees.

The contrary argument to punishing the firms is that some of the people getting big pay-outs work in departments that actually contributed huge sums of money to their parents.

If the management at these firms has any sense at all, they will pay nothing to the staff who worked in operations that lost money and file with the SEC to show the amount of operating income made from the operations where people are getting an extra check.

There will be hell to pay either way.

Douglas A. McIntyre is an editor at 247wallst.com.

It would seem to make sense that as the financial industry contracts and the federal government keeps a closer eye on compensation at firms that it helps bail out that the age of massive bonuses is over.

According to The New York Times, "For most of the financiers who remain, with the exception of a few superstars, the days of easy money and supersized bonuses are behind them. The credit boom that drove Wall Street's explosive growth has dried up."

It is way to early to say that the era of the big comp package is gone.

The competition for Wall Street talent will remain keen. With the rise of investment banking compensation, most money center banks like JPMorgan (NYSE: JPM) began to pay their top traders and M&A staff increasingly larger sums. They had no other way to retain the talent that would allow them to remain competitive.

The dynamics of personnel supply and demand have not changed. They have just shifted to another part of the industry -- the hundreds of hedge funds and private equity firms that have made thousands of executives, traders, and bankers rich beyond the imaginations of most people.

Compensation at big investment banks will stay high. It may dip during the current crisis. It would be bad PR to pay huge bonuses this year and next, but ultimately the banking industry cannot afford to see all of its best people walk out the door.

Douglas A. McIntyre is an editor at 247wallst.com.