NEW YORK ( TheStreet) -- The pay overhaul and temporary bonus cuts that are now sweeping the financial industry may prove which employees are devoted to their companies, and which are devoted to their lifestyle. Throughout the financial crisis that struck in late-2007, millions of Americans have lost their homes or jobs, and faced furloughs, pay cuts or waning perks until business conditions improved. Meanwhile, the financial sector was no stranger to layoffs initially, but its turnaround in hiring and compensation was remarkably quick. Some of the highest-paid employees at the banks and financial institutions that played the biggest role in the crisis haven't suffered much at all. In fact, before banks were shamed into revising pay plans, bonuses were poised for an all-time high at certain firms. As it stands, pay czar Kenneth Feinberg is ordering sizable cuts in compensation for the highest-paid employees at a handful of companies. His decision applies just for 2009 pay at just five companies that received "exceptional" taxpayer support: American International Group ( AIG), Citigroup ( C), General Motors, GMAC, Chrysler and Chrysler Financial. Bank of America ( BAC), once included in Feinberg's review, has managed to wiggle out of pay restrictions by repaying TARP funds in the nick of time -- except for CEO Ken Lewis, who will depart the firm at year-end with no 2009 compensation. He will, however, retain a retirement package estimated at over $70 million. AIG CEO Bob Benmosche managed to get Feinberg to weaken his more severe pay rulings for the highest-paid employees by threatening to quit. Several other top-level executives have threatened to do the same, and general counsel Anastasia Kelly is reportedly planning to quit.
It's unclear what will happen at companies that have already repaid bailouts funds, but are implementing stricter pay rules willingly after a public outcry. Goldman Sachs ( GS), known even on Wall Street for outsized bonus awards, is moving cash bonuses for 30 top executives into stock that will vest in five years. Others, like Morgan Stanley ( MS), and TARP-laden Wells Fargo, have taken similar measures on their own. It's worth noting that the employees facing compensation cuts aren't now going to be paid a pittance. They will still receive healthy base salaries, and one would have to wonder why they work in the financial industry if they hadn't created a cushion by saving and investing earlier years' rewards. There was once a strong argument that these workers are among the most talented and experienced financial-services professionals. They don't have to endure a pay cut; they can just take jobs somewhere else, including overseas rivals like Deutsche Bank ( DB), Credit Suisse ( CS), RBS ( RBS), UBS ( UBS), Barclays ( BCS) or Societe Generale, some of which had been aggressively suiting and hiring U.S. bank employees. But with Britain implementing a 50% bonus tax, and other European countries like France signaling support for such a move, would they really be better off across the pond? Furthermore, a top bank executive who doesn't believe that an award of company stock would be far more lucrative in five years' time than a cash award today probably shouldn't be working there to begin with. It appears that financial executives, bankers and traders may simply have to get used to doing more with less for a year. Wall Street may be better served saying good riddance to those who can't hack it than catering to their demands. -- Written by Lauren Tara LaCapra in New York