By Ann Williams

A year after dozens of banks around the world accepted billions in taxpayer bailouts to avoid being swept away by the financial crisis, the same banks are beginning to announce billions of dollars for bonuses to executives and traders - many of whom were the same people charged with the reckless risk-taking that led to the current recession.

Goldman Sachs and JPMorgan Chase, on the back of eye-popping profits announced last week, said they are setting aside money to dole out huge bonuses that will rival the record payouts they made in 2007 at the height of the bubble.

In contrast, Citigroup and Bank of America (BoA) announced losses last week - demonstrating the contrasting effects this crisis has had on consumer and investment banking in the United States. Their employees are likely to earn considerably less than they did before the crisis. Ousted BoA boss Ken Lewis even ended up with US$0 in salary and bonuses this year. Still, their staff will get much more than the average worker and top performers will still get their multi-million dollar payouts.

American International Group (AIG) also hit the headlines last week with a damning government report on its US$165 million (S$230 million) in retention bonuses to 'key' staff that included a US$7,000 payout to a kitchen assistant. In all, US banks and securities firms are on track to pay employees a record US$140 billion this year, according to an analysis from the Wall Street Journal last week. That's equivalent to one-fifth of the roughly US$700 billion taxpayers spent to bail them out.

Meanwhile, the US economy has shed 768,000 jobs, and home foreclosures have hit a new high. Over a million Americans have filed for bankruptcy this year.

'There is a massive divide between Wall Street and Main Street,' bank analyst Meredith A. Whitney told the Wall Street Journal. 'Main Street is suffering while Wall Street is doing great.'

So how much exactly will the banks dole out this year? How do they justify these pay packages? And should the man-in-the-street be angry about it?

TOP OF THE HEAP: GOLDMAN SACHS & JPMORGAN

For Goldman, it's almost as if the financial crisis never happened. Only months after paying back billions of taxpayer dollars, it turned another eye-popping profit last Thursday, earning US$3.2 billion in the third quarter, as revenue from trading rose four-fold from a year ago. In the last nine months, the bank set aside US$16.7 billion for compensation - enough to pay the average Goldmanite US$526,814.

For the whole of this year, Goldman is on track to pay each of its 31,700 employees close to US$700,000. Top producers can expect multimillion-dollar paydays.

Like Wall Street firms had done before the crisis, Goldman is setting aside almost half of its revenue to compensate its workers. The bonus pool is on pace to hit US$21 billion for 2009, which would match the record bonus payout of 2007.

For its very success, Goldman has come to symbolise for many a return to Wall Street greed.

As the Telegraph pointed out, even last year, at the height of the financial crisis, Goldman employees reaped rewards that most people can only dream about. It paid out US$4.82 billion in bonuses, awarding 953 employees at least US$1 million each and 78 executives US$5 million or more. The rewards for this year will be greater.

Like its rival Goldman, JPMorgan also saw its third-quarter earnings soar on the back of strong investment-banking results. The bank posted a seven-fold rise in profit to US$3.6 billion from US$527 million a year earlier. The bumper profits also heralded a return to bumper bonuses. The bank has now set aside US$21.8 billion in compensation for employees for the first nine months of the year.

It is on track to hand out up to US$29 billion in pay and bonuses this year, a 27 per cent increase on the last two years. The payout works out to US$131,304 for each of the bank's 220,861 employees, compared to US$100,906 each for staff at the end of the last year.

HARD HIT BY CRISIS: CITIGROUP & BANK OF AMERICA

For Citigroup and BoA, the good times have not yet returned.

Wall Street banks like Goldman and JPMorgan are making their pots of money on investment banking activities - on underwriting share sales and speculative trades - the same activities that sent the financial sector into a tailspin, according to critics.

The more commercial banks like Citi and BoA, however, have been hit harder by the recession, which has caused demand for loans to drop and delinquencies on loans to increase. Their earnings have been affected by the need to pay hefty dividends to their new big shareholders, particularly the US government.

Citi announced last week a net income of US$101 million for the third quarter, but after excluding preferred stock dividends and a US$3.1 billion expense for converting preferred shares into common stock, it saw a net loss to shareholders of US$3.2 billion.

BoA announced a quarterly loss of US$2.24 billion, after dividends to preferred shareholders.

Citi's pay and benefits pool looks set to total US$25 billion for this year, but when this is shared out between its 276,000 staff, it works out an average of 'just' US$90,000 each. The relatively low average pay is skewed by the fact it employs a large number of staff in its consumer banking business.

Citigroup also announced the sale of its Phibro oil trading arm - all to avoid a big confrontation with the Obama regime over the US$100 million bonus it paid its star oil trader Andrew Hall.

For BoA, the big news on pay was that CEO Ken Lewis, due to go at the end of the year, will receive no salary or bonus for the year, by order of Mr Kenneth Feinberg, the Obama administration's pay czar. Mr Lewis will also have to pay back the US$1 million he has received of his US$1.5 million annual salary. Not to worry though. He earned US$9.9 million last year and is due to receive up to US$125 million in previously accrued retirement benefits and accumulated stock holdings.

THE UNREPENTANT? AIG

A government report last week revealed that far from giving bonuses to retain some key staff, AIG doled out US$165 million in cash to a whopping 400 employees at its Financial Products (AIGFP) unit.

This was the same unit widely blamed for pushing the giant insurer close to collapse by selling insurance on high-risk derivatives, necessitating a US$180 billion government rescue last year. The payouts included US$7,700 to a kitchen assistant and US$700 for a 'file administrator.'

About 62 per cent of AIGFP employees received bonuses of more than $100,000. Senior executives took home bonuses of up to US$4 million. The report also revealed that AIGFP staff handed back less than half of the US$45 million of controversial bonus payments they promised to return earlier this year.

There's still US$198 million in retention bonuses coming their way next March, which pay czar Mr Feinberg will have limited say over.

JUSTIFIED OR NOT?

The main argument for reining in bonuses has been that there should be no rewards for failure or dangerous risk-taking. Well, Goldman did not fail - it made a whopping profit, which it argues was due to the skill and hard work of its staff. If such top talent were not fairly compensated, the bank argues, they would leave.

Goldman's chief financial officer David Viniar, rejected criticism that the bank's high bonus levels ignored the tough times ordinary folk are going through. The bank, he said, had a duty to its employees and to retain staff.

By paying the bonuses, he said, Goldman was trying to make a difficult trade-off between 'being fair to our people who have done a remarkable job' and 'also what's going on in the world'.

But critics say the profits reported by the likes of Goldman and JPMorgan could not have been achieved without government help. Ultimately, the taxpayer was the investor who ought to be reaping the results.

Goldman, for example, was one of the nine big banks that received government loans last October. It also recouped US$13 billion when Washington rescued AIG. And it has been a major beneficiary of the low interest rates the government has adopted in the hope of restarting the economy.

Goldman executives know they have a public opinion problem, and they are trying to figure out what to do - short of actually cutting pay.

The bank said last Thursday that it would donate US$200 million to its charitable foundation - or about 6 per cent of its third-quarter profit. There are rumours that it might donate as much as US$1 billion more in an effort to defuse public resentment directed at the bank. Meanwhile, its chief executive Lloyd Blankfein has reportedly told his free-spending bankers not to flaunt all that wealth around in conspicuous consumption.

Critics also argue that as the main aim of the bailout was to help banks build up the amount of money they had in their reserves so they could get back to normal lending practices, the billions of dollars being doled out to bankers should be used instead to bolster their balance sheets.

Finally, if the old bonus culture fuelled excessive risk-taking, will the return of outsized payouts bring about another crisis like the one from which we have only just emerged?

This article was first published in The Straits Times.