On Monday, Treasury Secretary Tim Geithner put a pin in the administration's pay caps-for-Wall Street trail balloon: "I don't think our government should set caps on compensation," Geithner said in an interview at the National Press Club.
But, like everything else in Bailout Nation, it's not a simple case of that being the end of it. Geithner also said: "I think we should be trying to get the incentives better."
In a nutshell, the administration wants compensation tied to long-term performance and disclosed clearly to shareholders, who would have the opportunity to vote on executive packages, a.k.a. "say on pay."
It's no coincidence this discussion on compensation is coinciding as banks, including Goldman Sachs, JPMorgan, Morgan Stanley, American Express and State Street, are reportedly seeking approval to pay back TARP funds.
The government is putting restrictions on banks' ability to repay TARP and also concerned about making sure there's a "level playing field" for banks still under the program when it comes to compensation.
If banks that escape TARP are able to pay employees whatever they like (i.e. whatever the market will bear) then those banks still in the program will be at a competitive disadvantage; that will put the government's investment in those latter banks at risk.
Of course, there doesn't seem to be enough concern about how the taxpayer will fare on investments in banks that are seeking to get out from under TARP, as The NY Times reports.