Kenneth Feinberg, the Special Master for Compensation, appointed by the Obama administration will soon demand that the seven largest firms that received federal bailout money slash their top 25 earning executives’ total compensation by half.

Feinberg has been doing an in depth study of Citigroup, AIG, Bank of America, GMAC, Chrysler and Chrysler Financial for the last two months.  He feels that his plan to reduce executive pay will enable these firms to repay taxpayer funded bailout money sooner.

The exact details of this new plan are expected to be released next week.  As it stands now, the salaries of these top executives will fall by 90 percent.

A source in the Treasury Department told CNN that “Feinberg is trying to strike the balance between protecting taxpayers and allowing companies to have the ability to grow their way out of TARP.”

Compensation experts are weighing in and they believe that such a severe cut in pay could cause these firms to lose their most valuable and talented executives.

Governance changes are also expected under the new plan.  The offices of CEO and Chairman of the Board of Directors are expected to be split into multiple positions.

It is highly likely that the plan will impose the harshest restrictions and cuts on AIG.  In the Financial Products division, which is the department of the firm that caused its massive decline, employees will not receive more than $200,000 in total compensation.

Our Take

It’s about time that the people who caused all of the problems started to pay for their mistakes.  The executives were the ones who made the bad decisions yet it’s the average everyday worker who is suffering and getting laid off or receiving pay cuts.  Average workers keep the companies running and have to live paycheck to pay check.  People who act recklessly and irresponsibly and push their mistakes onto the tax paying public should also have to suffer.  They should not be allowed to walk away free and clear.

Tax payers have been feeling the largest burden of the recession.  We have bailed out people who travel everywhere on private jets and collect multi million dollar pension funds and expect to continue their lavish lifestyle as we all tighten our belts to keep the economy running.  It’s good to know that the government has not forgotten about us and is not letting the big wigs escape with all their perks intact.