"We all need to take responsibility," he said while announcing the new compensation rules with Treasury Secretary Tim Geithner. "And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses."
"What gets people upset – and rightfully so – are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers," Obama said.
The $500,000 salary limit is still more than Obama makes -- $400,000 -- but is a pittance compared to the $20 million that Kenneth Lewis took home in 2007 as head of Bank of America, a corporation that needed $45 billion of public money to save it from its mountain of bad loans.
The president said the new rules announced today would be accompanied by an effort to determine "how corporate governance and compensation rules can be reformed."
There are exceptions to the new executive pay rules, however.
Banking executives can get extra compensation in restricted stock, but only stock that will not vest until taxpayers are repaid the loans, plus interest.
Companies bailed out by Uncle Sam are permitted to waive the $500,000 rule if they disclose executive compensation and allow investors a nonbinding vote on executive pay.
Banks that have already received several hundred billion dollars from the Troubled Asset Relief Program under the Bush administration won't be subject to the new rules. But several of those banks are expected to come back to the federal till for additional relief.
The new Obama TARP rules will require those companies to demonstrate they have complied with the previously issued restrictions on executive pay and lending requirements, and agree to strict monitoring and oversight going forward.
The new rules also make it harder for corporate titans to live the high life on the public dollar. They include restrictions on how the money can be spent, with a bull's-eye on such items as aviation expenses, office renovations, entertainment and corporate parties.
The new Treasury provisions expand rules established under the Bush administration. Restrictions on golden parachutes originally applied to only the top five executives of an affected bank. That will now be extended to the top 10 officials, and golden parachutes for the next 25 top officials will be limited to one year's pay.
Clawback rules that would require banking officials would have to return bonuses if found to have falsified reports. Those rules originally applied to a bank's top five executives, but under the rules detailed today that would be extended to the top 25 bank officials.
The public has been repeatedly infuriated by examples of federally subsidized bankers still spending lavishly on themselves while laying off tens of thousands of employees and of retirement nest eggs vaporized.