| NEW YORK
NEW YORK This may be the week that Wall Street finally realized a golden era of prestige, high pay and perks has ended.
Many bankers felt they could hunker down through the economic crisis without transforming their behavior.
But then this week new U.S. President Barack Obama made it clear their attitudes and compensation have to change at a time when they are being bailed out with many billions of dollars of taxpayers' money and the rest of the country is suffering from mass layoffs and declining retirement accounts.
"That is the height of irresponsibility. It is shameful," Obama said on Thursday, responding to news that Wall Street paid out $18.4 billion in bonuses for 2008.
In the previous few days, Obama and his spokesman had weighed in against Citigroup's decision to buy a $50 million corporate jet ordered in 2005, prompting the bank to cancel the contract, and attacked former Merrill Lynch CEO John Thain for spending $1.2 million on renovating his office.
One Democratic senator on Friday even proposed a law that would prevent bank executives from making more than $400,000 a year while they receive government financial support.
Add it all up, and Wall Street has little choice but to make changes big and small, veteran bankers and compensation experts said.
"You'd better scrutinize executive lunch rooms, you'd better scrutinize your offices, you'd better scrutinize those fresh flowers and car services and jets," said Alan Johnson, a leading compensation consultant.
With shrinking bonuses and perquisites comes less prestige, said Steve Persky, portfolio manager at Dalton Investments in Los Angeles.
"The heyday of working on the sellside is over," Persky said.
Some on Wall Street bridle at having to rein in their spending habits, but some are philosophical.
"As long as the government is putting money into these organizations, they have a right to that voice," said Alan Greenberg, former Chairman of Bear Stearns Cos., which had to be rescued by JPMorgan Chase & Co. with the help of the government last March.
Gary Goldstein, president and CEO of Whitney Partners, an executive search group specializing in financial services, said changing the way compensation is distributed will be a change for the good.
"It has become very corrupt," Goldstein said. "I've watched it over the years and everyone was taking their piece of the pie ... and not paying attention to the end game, which is the little guy who ends up with all of these securities on their retirement accounts."
Bonuses at big banks could slide a lot further, and they won't come back to recent heights anytime soon, experts warned.
Johnson forecast a 15 percent to 20 percent drop in bonuses at the world's biggest financial firms this year, following a 45 percent decline in 2008.
"Any amount is too much," Johnson said of bonuses. "If you think it's bad now, it's going to be worse in '09."
Bonuses were excessive in recent years because factors like deregulation created outsized opportunities, an academic study published last month showed.
The study, by New York University Professor Thomas Philippon and University of Virginia Professor Ariell Reshef, found that 30-50 percent of the extra pay Wall Street employees got relative to the rest of the private sector over the last decade could be termed excess pay, or pay not justified by factors like education or technology.
There was a similar spike in relative pay just before the Great Depression in the 1930s, and financial sector compensation took many years to recover once it plummeted.
"The spike has passed, and people on Wall Street will be treated more like everybody else," said Roy Smith, finance professor at New York University and a former partner at Goldman Sachs.
Not every Wall Street employee will stand for it. Many will try to find jobs at smaller firms, which are not receiving support from the government and therefore do not have to limit pay.
But many will have to leave the industry altogether, said Robert Sedgwick, a lawyer at Morrison Cohen LLP in New York who negotiates executive pay packages.
"There are not nearly enough smaller places to go," Robert Sedgwick.
Some do think that once financial markets recover, bonuses will start to recover, albeit to levels lower than those seen earlier this decade.
"Wall Street will still pay big bonuses, because that's how they're set up -- they have low overhead and they offer a large incentive in compensation," said John Gutfreund, who was chief executive of Salomon Brothers in the 1980s, when the bank mushroomed.
But for now, with lower pay on Wall Street, the joy of working at a large firm has passed, Morrison Cohen's Sedgwick said.
"What are jobs about? They're about having fun and making money," Sedgwick said. "But at the big firms, both are being substantially reduced."
(Reporting by Jonathan Spicer and Dan Wilchins; Editing by Bernard Orr)