Eight major banks which were at the front of the line for government bailouts have already set aside $117.6 billion this year to pay employees, almost as much as they paid in all of 2008, a Reuters analysis has found.

If the banks continued that pace, they would far surpass what they paid in 2008 though fall short of the watershed paydays of 2007, when the financial sector was still booming, the analysis found.

The pay offered by top banks reflects the dramatic rebound at some of them, but also shows that industry conditions have not quite been restored to 2007 levels -- before the collapse of Lehman Brothers and the fire sale of Bear Stearns, industry analysts said.

Critics say it is also a sign that banks have learned few lessons from last year's financial crisis, which has been widely blamed on Wall Street's pursuit of short-term profits that pumped up pay.

Banks don't appear to have learned much, at least on the compensation side, from what we've been through, said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University. Don't tell me you are bringing me back to the good old days of yesterday. Getting back to pre-Bear Stearns or Lehman is not fixing it. It is setting us up for another fall.

The analysis shows that the banks have reversed losses from a year ago, reporting about $30 billion in net income so far this year. The same banks reported $60 billion in 2007 profit.

So far in 2009, the banks have set aside nearly four times their collective profits for employee pay and benefits, up from 2007, when compensation was more than double profits.

The key is why does this model exist in finance and not in any other industries? asked Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, who noted that investment banks routinely devote about half of their net revenues to compensation.

The eight major banks that took a total of $165 billion in bailout funds were Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N), Citigroup Inc (C.N), Bank of America Corp (BAC.N), Bank of New York Mellon Corp (BK.N), State Street Corp (STT.N) and Wells Fargo & Co (WFC.N). A ninth, Merrill Lynch, was taken over by Bank of America.

The bailout funds were doled out at the height of the financial crisis and some banks argued that they did not really need the money, but were strong-armed into taking it by then-Treasury Secretary Hank Paulson.

Goldman, JPMorgan, Morgan Stanley, Bank of New York Mellon and State Street have repaid the billions they received.

POLITICAL CROSS-HAIRS

The firms have been able to do what we all thought six or nine months ago was impossible -- report respectable earnings, pay their people well, build up their capital base, and take write-offs, all at the same time, said Alan Johnson, a Wall Street compensation consultant.

The recovery has not been universal, however. Citigroup and Bank of America ended up having to take billions of dollars in additional bailout money and both posted losses in the most recent quarter.

The banking industry has undergone a dramatic transformation over the past two years, with the combinations of Bank of America with Merrill Lynch; JPMorgan Chase with Bear Stearns and Washington Mutual; and Wells Fargo with Wachovia. Investment bank Lehman Brothers collapsed in September 2008, signaling the worst of the recent crisis. 

That banks are building outsized bonus pools so soon after they took government help has been met with anger.

The Obama administration's pay czar last month announced he would slash the pay for the most highest compensated employees of Citigroup and Bank of America, both of which received extraordinary government assistance.

The U.S. Federal Reserve on Monday hosted meetings with bank executives across the country regarding its own proposed pay rules, encouraging banks to move quickly to adopt them.

They are absolutely in the political cross-hairs right now, said Michael Holland, chairman Holland & Co in New York. Anything they do with compensation is something the demagogues are going to have a political sport with.

The pace at which banks are stashing away money to pay employees might help explain why regulators seem to be hastening their efforts.

These numbers explain why the Fed is in hurry-up mode, said Hurley, of Boston University. They want to have them reconsidered.

(Reporting by Steve Eder in New York. Additional reporting by Joe Rauch in North Carolina. Editing by Gerald E. McCormick)