President Obama and Treasury Secretary Geithner are announcing what was already widely know, a $500k pay cap for executives of firms that accept government bailout money in the future. The President says Secretary Geithner will release a new “credit strategy” (a financial rescue plan) next week. (This is not new.) Banks’ compensation committees will be asked to say how executive pay will be aligned with risk management and long-term company growth. Obama says broader pay reforms will be forthcoming. A great deal of focus is on the populist (and moral hazard) issue of compensation, but the rescue package due next week is likely to be more consequential in the short and medium term.



