NEW YORK (Reuters) - Bankers and traders are bracing for sharply reduced bonuses amid one of the worst downturns ever -- and they will be the lucky ones.

A street sign on Wall Street outside the New York Stock Exchange in New York, April 18, 2007. REUTERS/Eric Thayer

With more than 75,000 jobs already cut and more than $400 billion of credit losses, the proverbial blood is flowing on Wall Street. And while there are still four to five months left in the year, annual bonuses representing the bulk of Wall Street pay are expected to fall by 30 to 40 percent, recruiters and compensation experts said.

Given the environment, there may be little choice but to accept the cuts and hope for a 2009 rebound.

“It’s clearly a buyers’ market,” said Robert Sloan, head of the U.S. financial services recruiting practice at Egon Zehnder International. “The assumption going into this year is you can take your base salary or severance. That’s the choice. There’s a resignation in the market.”

Wall Street firms typically pay out about half their revenue as compensation. Based on performance so far this year, a period that saw Bear Stearns fall off the map, payouts are poised to fall hard.

Morgan Stanley last month said its first-half revenue fell 28 percent, and the funds set aside for compensation dropped at the same rate to $7.03 billion. Goldman Sachs revenue fell 22 percent, with the compensation pool down 23 percent to $8.5 billion.

Last week, New York state officials estimated total bonus payments from the nation’s financial hub would plunge 20 percent, removing billions of dollars from the tax rolls.

“Things have been bleak,” said Brent Longnecker, chief executive of Longnecker & Associates, a compensation firm.

FROM ZERO TO $40 MILLION

Actual payouts will span the range from zero to healthy increases. Some executives are refusing bonuses, notably Lehman Brothers Chief Executive Richard Fuld and President Herbert “Bart” McDade.

Others will still strike it rich. Former Goldman star Thomas Montag, who starts work at Merrill Lynch on Monday as head of sales and trading, will receive a guaranteed $40 million for five months work.

Meanwhile some firms are building up certain businesses even as they hand out pink slips at others. Morgan Stanley this week said it will redeploy some of the $1 billion of savings from 4,800 job cuts to recruit top executives.

Goldman Sachs says its headcount will rise by low single digit percentages, despite slashing 10 percent earlier this year, fueled by expansion in fast growing markets outside New York. But these are exceptions.

“Right now we see the volume of opportunistic hiring is also reduced,” Sloan said.

Compensation experts also said that with firms eager to conserve cash while holding on to key employees, a bigger slice of bonuses will be paid out in restricted shares. Banks, moreover, are asking for longer hold periods -- for three or five years.

That said, last year actual bonuses proved higher than predicted as many firms paid up to avoid losing top bankers and traders, mindful of past downturns when markets quickly snapped back. Yet U.S. housing prices remain under pressure and the credit crisis continues to spread.

Many Wall Street executives say the current downturn is far worse than other recent slumps, including the post-Internet bubble period of 2002 and 2003. So until profits do bounce back, banks and their employees will be playing defense.

“It’s a cyclical business,” said Adam Zoia, managing partner of Glocap Search. “And the key thing during a downturn is keeping your job.”