Wall Street is still handing out bonuses for 2007, when the five biggest independent banks earned a total of $11.4 billion, down from $32.1 billion in 2006. But those banks paid their employees a record $66 billion last year, 10 percent more than in 2006. Although Merrill Lynch and Bear Stearns aren't awarding bonuses to top execs, it's worth asking why banks are giving away huge bonuses at all.

1. Because of Goldman Sachs. Earnings at Wall Street's leading bank soared by more than 20 percent last year, raising Goldman's bonuses by 23 percent. Because every other Wall Street bank strives to keep up with the Goldmans, that increase is the new industry benchmark.
2. Because of recordbreaking sectors. Though Merrill Lynch lost $7.8 billion in 2007 and recorded more than $24 billion in subprime write-downs, it had a record year in the equity-market, private-client, and investment-banking groups. And bankers who've increased revenues by 60 percent expect to be rewarded accordingly.
3. Because bankers get paid even when their deals fail. If you structure a security and sell it to your clients, it's off your books and you've made your fee. There were big profits last year in structuring risky debt deals—as long as you didn't hold on to them yourself.