Carnage Beckons on Wall St.

Fretting about bonus money is Wall Street's latest fixation, but investment bankers may soon have more pressing worries.

September could bring a wave of layoffs as big banks aim to bounce back from the summer's credit market swoon. Mass firings now could help brokerage firms cut costs and show investors they're taking decisive action to compete better in a tough market.

It also may have dawned on banking honchos that cutting staff will help preserve whatever's left of their dwindling bonus pools.

"I think [bank execs] are thinking, if I cut right now maybe I save some of this bonus," a senior executive at a Wall Street firm tells TheStreet.com.

The layoffs have begun, though so far they have been mostly confined to the investment bank mortgage desks that were so instrumental in this summer's subprime tsunami.

Wall Street's willingness to repackage bad loans into opaque, bondlike instruments has sent investors scampering for the safety of Treasury debt, leading to the collapse of demand for mortgage-backed securities.

This week alone, Lehman Brothers (LEH Quote) fired 1,200 workers and Bear Stearns (BSC Quote) laid off some 240. UBS(UBS Quote) is said to be considering layoffs because of a drop off in trading revenue, though a spokesman says no announcement of job cuts has been made.

But observers expect the mortgage business cutbacks are only the beginning, and that many firms will wield the ax with authority.