Cash Poor Wall Street millionaires are saying goodbye to mega-bonuses and outsized base pays-for good.

By now, it's becoming accepted wisdom that things will never be the same again on Wall Street-not least: the stratospheric salaries and bonuses that bought Gulfstreams, art, and vacation houses in exotic locales.

At New York investment-advisory firm Gerstein, Fisher & Associates, Gregg Fisher has hired 10 people over the last year from the big firms-including a 20-year private-banking veteran from a major investment house, for 40 percent less than she was previously making. He's also been talking with a fixed income fund manager about coming on board for a quarter of his former salary of $2 million a year. "I told him I couldn't offer more in a good year to start," Fisher says. "But we're still talking so I think that tells you something about the market."

Such realities are something a lot of bankers may have to get used to. As Wall Street faces its biggest crisis since the Depression, the U.S. financial industry is undergoing a fundamental transformation. Investment banks are essentially commercial banks now, with the requisite limits on risks and rewards. Less leverage-around 10 to 1 at commercial banks compared with the ratios of 30 to 1 or higher that some investment firms enjoyed-will mean less potential for whopping gains. Commercial bank pay structures also tend to be more conservative. That, combined with public pressure and increasing government scrutiny, could mean smaller bonuses and less lavish compensation packages in the future, says Mark Borges, principal at Compensia, a compensation consulting firm in San Francisco.

"It's not that people on Wall Street won't still make a lot of money," says Borges. "You just won't have the financial services area outpacing everyone else the way they did the last several years."

Recruiters and compensation experts are already reporting declining offers for entry-level employees and fewer equity buyouts for senior people. Bonuses are expected to be down at least 40 to 50 percent for 2008, and perhaps more in 2009. For a second-year investment-banking associate who earned base pay of $100,000 and bonus of $100,000, that might mean a $50,000 pay cut. A more senior manager accustomed to bonuses up to three times base salary could be looking at a seven-figure drop. "We're seeing a bit of pressure on managing director salaries," said Alex Alcott, an investment-banking recruiter with Heidrick and Struggles. "Flat is the new up now. Down is the new flat."

The drop in salaries reflects an unusual supply-and-demand quandary in which both the industry and profits are contracting, notes New York compensation consultant Alan Johnson. Unlike with previous downturns, even when things come back, the structure will be different. "It may be that the industry can't support so many jobs anymore," says Johnson. "Or $50 million paychecks."

Making matters worse is the declining number of opportunities off of Wall Street. Hiring at private-equity firms has slowed, since the credit crunch has made it harder to do new deals. This is particularly true at the senior levels, since those employees tend to be the ones who bring in business, says Adam Zoia, managing director at Glocap Search in New York. But salaries for junior talent are going down as well, as the pool of available candidates grows. Starting compensation (base plus bonus) for someone with a couple of years' experience used to be around $400,000. Today it's closer to $300,000.

"I think for awhile it got inflated," Zoia says. "There was such a huge increase in the demand for talent. Now it's a little more realistic."

Hedge funds have also grown more conservative as they may soon be facing their own problems. Hiring has stalled at small funds, where redemptions are threatening survival. Although some funds posted record profits and will pay their people accordingly, average compensation at hedge funds is down almost 20 percent this year, according to a recent Glocap survey-the first decrease in seven years.

So where will all the bankers go? Certainly some will go into business for themselves. Former Bear Stearns vice chairman Donald Tang recently left J.P. Morgan Chase in Hong Kong to start his own private-equity fund. But not everyone has a résumé or the appetite for risk-particularly in this market. Stuart Kruse, a former portfolio manager with Lehman Brothers who went out on his own last year, says he's been inundated with calls from friends in the industry seeking career advice. He expects a small number to try opening their own shops, while others trade high pay for security and go into commercial banking or to smaller firms. "Right now they're trying to decide their options and they're really shaken up," he says.

Adjusting to this new reality may be more difficult for some than others. One former senior banker confessed that he initially balked at the lower salaries he was offered by smaller boutique firms, but he has since taken an optimistic view on some of the opportunities. "There's a little bit of a sense that someone could be more creative or have more of an impact in one of these places," he says. "And over time the money gets better." There is likely to be a lot of glass-half-full talk from those lucky enough to land new gigs.

And what of the future would-be bankers? At Harvard Business School, it's still too early to tell whether some students will abandon banking for jobs in industry or consulting.

"I think what we're seeing is students stepping back and looking at their risk tolerance," say Jana Kierstead, who heads career services at H.B.S. "They're wondering if it (banking) is still a fit."

Meanwhile, some small shops like Gregg Fisher's, which manages $1 billion, may benefit from the lower expectations.

"Before, I think it would have been difficult to attract and afford these people," he says. "Now I think they're realizing they may have to start lower and build up over time-that those kids who were making $1 million a year, two years out of school, that's not going to happen anymore."