On Thursday, White House pay czar Kenneth Feinberg outlined compensation restrictions at seven firms that got special bailouts, and the Federal Reserve proposed to review pay practices at 28 unnamed giant banks. Critics warn that reining in pay makes it hard to keep talented employees. Hemmed in, institutions like AIG, Bank of America and Citigroup could lose their best people. These firms would then perform even more abysmally, if that's possible, leaving them hard pressed to repay tens of billions of dollars of taxpayer-backed loans. Wall Street's employees have always received exceptional bonuses despite their performance, but now with a decrease in pay on the horizon, it appears that they have officially lost all motivation. Perhaps part of Wall Street's demise is that its employees had no incentives to perform better if their compensation always remained the same?
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