$500,000 Executive Pay Cap: Reform or Political Gimmick?

Feb. 5, 2009— -- CEOs used to the good life are coming to terms with the new era of corporate austerity.

General Electric's Jeffrey Immelt said today that someone had to show him how to buy a ticket when he stopped taking the corporate jet on his trips to Washington and took Amtrak instead.

Immelt said that grounding the Gulfstreams is one thing, but President Obama's decree that CEOs who accept substantial taxpayer help will be limited to $500,000 in salary could have more dire consequence.

Immelt added to the growing debate about whether the compensation restrictions will help stabilize the economy or is just a political move.

The president's new bailout guidelines also restrict golden parachute severance packages and require more disclosure about corporate jet use and entertaining expenses.

Those in favor say the little guy has been suffering long enough and it's about time that CEOs made their own sacrifices.

Those opposed fear that some executives will now be hesitant to go to the government for help and that these restrictions will prevent companies from recruiting or keeping the best and the brightest executives available.

ABC News asked some of the financial world's leaders for their thoughts on Obama's plan. Here are their reactions.

GE's Immelt said during a breakfast lecture for business executives this morning that he doesn't want anybody else running JP Morgan Chase right now than its current CEO, Jamie Dimon.

"I think this is a guy worth more than $500,000," said Immelt who took home $19.6 million in 2007. "They should want to have the best people on Earth running these banks."

If JP Morgan Chase comes back to the taxpayers for more assistance, Dimon would likely be subject to the new salary rules. Immelt explained that in the new era of austerity, he has had to change his lifestyle. When he goes to Washington, D.C., he doesn't fly on a corporate jet.

"I take the train now," he said.

"I had to have somebody show me how to buy a ticket," Immelt added as a joke.

(It is still a first-class ticket.)

Former Treasury Secretary Paul O'Neill said Obama's move "is going to be a very popular populist move. … Even though I think it is a large mistake."

O'Neill, who served under President George W. Bush, told ABC News that the banks would have complied if Obama had asked them to voluntarily follow the new limits. He also pointed out that many of the banks' employees get annual bonuses, not just the top executives. Should the limits apply to them, too, O'Neill asked.

He also said the pay limits could hurt the banks' ability to compete. "To the degree there are competing institutions out there not affected by the new edict, does this give those institutions a significant competitive advantage in attracting talent?"

Obama did pick up one powerful endorsement from across the aisle: House Minority Leader John Boehner, a Republican from Ohio.

"I think if anybody is looking to the taxpayer to help bail their company out, these kinds of executive compensation limits are appropriate," he said.

On the $500,000 pay limit, Boehner said, "I think somebody's got to pick a number. The president has picked one. I applaud him for doing it."

Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, also expressed concern.

"If you're an executive working there, your compensation is now limited to half a million dollars a year plus restricted stock and if your market value is higher, then you may choose to leave that institution," Talbott said. "If you are an institution that is looking for outside assistance and can only pay them half a million dollars plus restricted stock and the value of that employee that you are seeking, that potential hire is higher, then it would be difficult to attract them."

Talbott said that the pay scale for Wall Street "is different for the pay scale for America and so these numbers look large" but there is a "market value for these executives."

"There's a very small talent pool of individuals that have the education, experience and knowledge to operate a global, international services firm in this day and age," he said.

Talbott added that "these restrictions could have a chilling effect on participation in" the next round of government bailouts.

ABC News' Dean Norland, Mark Mooney, Matt Jaffe and Eileen Murphy contributed to this report.