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NEW YORK (

TheStreet

) -- Wall Street bonuses declined by 8% in 2010 as the largest U.S. banks and broker/dealers embraced "deferred compensation" programs pushed by regulators following the 2008 financial meltdown.

Cash bonuses paid to employees in New York City's securities industry was $20.8 billion in 2010 compared to $22.5 million last year, according to a report issued by New York State Comptroller Thomas DiNapoli on Thursday.

The decrease in bonuses was despite the fact that Wall Street recorded profits totaling $27.6 billion in 2010, which is second only to 2009's rebound-juiced record profit of $61.4 billion.

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DiNapoli rationalized that the declining bonus pool, despite strong profits, was proof that bankers were embracing compensation schemes that focused on long-term performance.

"Cash bonuses are down, but that's not an indicator of a weakness on Wall Street," DiNapoli said. "Wall Street is changing its compensation practices in response to regulatory reforms adopted in the aftermath of the greatest financial meltdown since the Great Depression. Past practices rewarded short-term gains at the expense of long-term profitability."

The report also pointed out that although Wall Street's cash bonus pool declined, overall compensation grew by 6 percent in 2010 as executives bumped-up employee base salaries.

The shrinking bonus pool also has a down side for New York State's suffering finances, DiNapoli explained in a statement. The report adds that Wall Street's contribution to New York City's budget has declined from 13% of tax revenue to 7%.

"The industry's greater emphasis on deferred compensation will hold down tax collections this year, but the state and the city will benefit in future years when taxes are paid on this deferred compensation," the DiNapoli argued.