It depends on the subfield. I've heard that I-bankers work crazy hours - 16/7, as you say. But my hedge fund friends usually work a pretty standard 9 hour day, 5 days a week (well, occasionally they'll be researching financials on a weekend, but it's because that's what they like to do). And they take pretty frequent vacations.

There's an element of risk-transference in the high financial industry salaries. When times are good, lots of money flows into the financial industry, which props up salaries. When times are bad, firms go under, people get laid off, and salaries drop. However, the loss is never entirely born by the employees - after all, somebody out there lost all their principal because Bear Stearns imploded. So on average, Wall Street employees will make more than people in steadier, more risk-free jobs.

Same goes for entrepreneurs, for that matter. If the company does well, they get multi-million-$ payouts. If the company folds, their investors bear part of the loss. So on average (mean), an entrepreneur will do better than an equivalent employee, even though on average (median), the entrepreneur ends up with nothing.

The investment bankers are certainly working 80-100hrs/week and mastering BrickBreaker on their Blackberries. It's not so bad in trading... 5 days a week, ~12hrs/day.