Who would pay all the taxes we need to collect if they limited pay?
Also, lost in this discussion is that they are not limiting pay. They are limiting the deduction for the pay. A company that takes bailout funds can still pay their CEO $10M, but $9.5M will be taxed. The effect is a tax increase, because the government cannot nullify employment contracts.
That's correct, and in the long run they'll pay what they have to pay to attract talent, like any tax increase it will work it's way into pricing. All that's accomplished is placing firms taking federal funds at a competitive disadvantage vs non funded and foreign firms. They're licking their chops in London. And a few banks have generated enough in loss' that taxes won't be a worry for a few years.