Despite the uproar over bonus payments at taxpayer-supported firms like

American International Group

(AIG) - Get Report

and

Merrill Lynch

, a simple fact stands in the way of limiting bankers' salaries: The best and the brightest must be paid to stay.

Now that populist rage has died down, with the help of regulators who realized its counterproductivity, banks are taking a stand to keep their top talent from fleeing into the arms of foreign firms, and less regulated competitors like hedge funds, private equity firms and private institutions.

A report in the

Financial Times

on Sunday reported that some big beneficiaries of government support, including Merrill,

Citigroup

(C) - Get Report

,

Morgan Stanley

(MS) - Get Report

and

UBS

(UBS) - Get Report

, are increasing pay packages to halt the mass exodus that started to take place. The paper quoted a source saying that UBS and Merrill had lost about 25% of top talent to strong foreign competitors like

Barclays

(BCS) - Get Report

,

Credit Suisse

(CS) - Get Report

and

Deutsche Bank

(DB) - Get Report

, which didn't face as stringent regulations or harsh scrutiny on executive compensation.

Another anonymous source at one of the expanding banks said offers had been as high as 80% of peak pay packages in 2007, despite the market's downturn.

The change in both action and tone marks a turning point in the financial sector's recovery process.

So far, with each "bonus scandal," the plot has moved in this order: Bonus payments hit headlines; taxpayers bristle at unfairness, given rising unemployment; and lawmakers get up in arms, haul executives like AIG's Edward Liddy or BofA CEO Ken Lewis before congressional committees, fueling the fire. BofA, one of the largest bank recipients of federal aid, acquired Merrill at the start of the year, making Lewis the person who answers to any Merrill-related shenanigans.

But now, rather than shrinking from attention related to retaining top talent, Bank of America has publicized key hires. The bank had suffered through months of negative attention about Merrill's "thundering herd" of brokers and top executives departing for better offers elsewhere as public scrutiny ramped up.

BofA last week told the

New York Post

, in a response to a story about the packages being offered to keep top talent, that Bank of America is "taking the steps necessary to retain key talent," adding that recruiting is "competitive" and "very intense."

In other words, yes, we are offering lucrative pay packages to keep people on staff who will help us succeed through the downturn.

It might also be worth noting that when no one made a big stink about a company's payouts, the company was able to avoid the spotlight.

Goldman Sachs

(GS) - Get Report

provides a perfect example.

The firm paid $4.7 billion in compensation and benefits during the first quarter, representing an 18% increase from a year earlier, according to its first-quarter financial report. The sum represents nearly half of the $10 billion in bailout funds Goldman received.

The firm attributed the increase in compensation to higher net revenue, meaning the cost did not rise because of higher salaries, higher benefit costs or more workers. It rose because of bonuses.

In fact, employment levels decreased 7% over the year due to layoffs, and the ratio of compensation and benefits to net revenues rose to 50% from 48%.

All of those figures are somewhat warped, however, because Goldman's fiscal calendar switched due to its change from an investment bank to a bank holding company. December was a bad month, with over $1 billion in losses, which wasn't counted in the first quarter of 2009. Therefore, it appears as though revenue improved 13%, but only if one compares the period of December 2007 through February 2008, vs. January 2009 through March 2009. Goldman did just that.

The bottom line when it comes to pay, however, is that Goldman got rid of the workers whose performance was less than stellar, and those remaining on the payroll were earning more money for every dollar they brought in. Otherwise, the best and brightest would have gone elsewhere for more competitive offers.