Gretchen Morgenson On Bailout Bill Compensation Limits

Morgenson, in Sunday's New York Times, waxes approvingly about the compensation limits in the governments purchase of equity in banks.  The limits are more illusion than substance.  First, there is no cap or other limit on salary or bonuses. Just a vague requirement that whatever salary is paid give appropriate risk taking incentives.  Whatever that is.  A the government, without a vote as a shareholder, cannot have a say in defining the term once the money is paid.  Second, The clawback provision, in which bonuses must be returned if they depend on financial figures that later are shown to be wrong, will discourage incentives tied to specific performance goals.  Third,  the prohibition on golden parachute payments that are over three time salary is easy to circumvent.  A severance contract can vest after the repurchase of government stock or after the government sells its stock.  And fourth, and most important, the new tax limit on deductions for over $500,000 in salary will not stop the payments anymore than the old limit of $1 million did.  These compensation limits are toothless.