Porkulus Bill Contains Provision Limiting Executive Salaries

Tell me how this measure will stimulate the economy:

The stimulus package Congress passed last night imposes new limits on executive compensation that could significantly curb multimillion dollar pay packages on Wall Street and goes much further than restrictions proposed by the Obama administration last week.

The bill, which President Obama is expected to sign into law next week, limits bonuses for executives at all financial institutions receiving government funds to no more than a third of their annual compensation. The bonuses must be paid in company stock that can be redeemed only when the government investment has been repaid. With the measure, lawmakers seek to address public outrage over extravagant Wall Street paydays even as taxpayers bail out the industry.

Unlike the rules issued by the White House, the limits in the stimulus bill would apply to top executives and the highest-paid employees at all 359 banks that have already received government aid.

"This is a big deal. This is a problem," said Scott Talbott, chief lobbyist for the nation's largest financial services firms. "It undermines the current incentive structure."

I addressed some of the problems this kind of compensation cap will cause in the free market in this post. Essentially, these banks have just been removed from the competitive environment which means they'll have a hard time keep and recruiting new senior managers. They'll end up with 2nd and 3rd tier talent running those institutions, banks that are already in trouble.

Terrible move by the Porkulus writers. All they wanted to do was get even with the banks, many of which were forced to take the government funding.