Because Obama’s plan to limit executive pay to $500K to TARP recipients will sink or swim on the loopholes.

Larry Summers’ suggestion that, “Executive compensation above a specified threshold amount be paid in restricted stock or similar form that cannot be liquidated or sold until the government has been repaid,” is one such loophole, because if the restricted stock has dividends, it’s back to the races.

One of the things that needs to be understood is that Wall Street’s excessive salary structure is not just a symptom of the current banking problem, it’s one of the causes, because the excessive leverage and incompetent risk taking made year over year results so remunerative that it encouraged byzantinely complex instruments.

As a note, it’s actually not the executives who will get hit hardest by this:

“That is pretty draconian — $500,000 is not a lot of money, particularly if there is no bonus,” said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. “And you know these companies that are in trouble are not going to pay much of an annual dividend.”

Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.

(emphasis mine)

It’s the “compensation consulting firms”, whose business model is to get paid lots of money from CEOs and Boards of Directors to recommend high salaries to those very same CEOs and Boards of Directors, who lose the most.

It sure beats working for a living.