Looks like firms that participate in PPIP (the Treasury program establishing a public-private partnership to buy toxic assets) may be subject to executive compensation caps after all.  Treasury had said they wouldn't be, but it sounds like their lawyers have informed them otherwise.  The Economist thinks this is the end of PPIP.  Ryan Avent is not so sure:

Most of the the big banks are already subject to the limits based on other TARP money they've received, and the ones healthy enough to pay those loans back are also least likely to need to get rid of their bad assets. And with stress test results soon to be in hand (along with increased equity stakes, one suspects) the government will have as much leverage over potential participants as ever. What will be interesting to learn is whether the limits will apply to the fund managers and non-bank investors (and whether they'll be able to find ways to get around the rules).

This is an interpretation problem with the article.  Ryan thinks this means that banks that sell assets will be subject to caps; the Economist blogger (I think) is reading the article to imply that banks that buy assets will fall prey.  The article seems to me to support the Economist's reading--they're also talking about capping salaries at Bank of New York because it's administering the consumer loan program.  But it's ambiguous, and I don't think we can say either way until the actual report comes out.

Clearly, if there are pay caps on the investors, PPIP is dead.  And even if there aren't, I'd say the likelihood that a given firm will participate has just declined substantially.  There is clearly enormous regulatory risk for anyone who chooses to get involved with any of these programs.

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