What is really needed is not strict compensation caps, but smarter, more flexible performance-based pay that aligns bankers' interests with those of their shareholders.
They fall under strict compensation guidelines set by the federal compensation czar, whose job it is to see that companies enjoying significant government support don't fritter away taxpayer money.
Mr. Geithner has already signaled a willingness to impose stricter compensation limits as part of a revamped approach to dealing with the banking crisis, but with his strong words on Thursday, Mr. Obama seemed intent on reassuring Congress and the public that he would step up the pressure on bankers before granting them additional assistance.
But after Congress passed its economic stimulus bill in mid-February, the repayment policy was loosened as strict new compensation rules were put in place.
They will, however, be held to strict restrictions on compensation, including a prohibition on golden parachutes and requirements to return any improper bonuses.
Cravath, along with Debevoise & Plimpton and Cleary Gottlieb Steen & Hamilton, are three remaining law firms that adhere to a strict lock-step compensation system, paying their partners in a narrow range according to seniority.
Preventive measures could include strict limits on compensation for bank executives and others until the banks are able to restore their balance sheets to fiscal sanity.
In return, AIG has to comply with strict limits on executive compensation, corporate expenses and lobbying.
Stocks were down on Wednesday, as the government announced a strict stance on executive compensation for companies accepting Troubled Asset Relief Program funds.
Steeply progressive income taxes with marginal rates as high as 94percentt, limits on executive compensation, and strict controls on the bond market led to a compression of the income distribution that lasted more than a quarter-century.
However, in countries with low or no compensation, albeit strict legislation, implementation of these regulations is extremely difficult, and as a consequence regions of endemicity may be formed or continue to persist [ 20].
