That's certainly the line Goldman CEO Lloyd Blankfein is pushing. Thanks to the strings attached to the TARP (i.e., bailout) money they've received, banks like Goldman face restrictions on how much they can pay their 25 best-compensated employees (more or less). As I understand them, the restrictions don't limit pay per se, but do limit the size of a bonus to one third of overall compensation, which is meaningful since that's where most of these guys make their money. (This fact sheet is pretty helpful.)

The implication of this Journal piece is that this makes it tough (but hardly impossible) to pay your top 25 employees much more than $1 million a year, which is a real constraint for Goldman as it minted 953 millionaires last year. In fact, the restriction theoretically creates a weird situation in which Goldman's 25 highest-ranking employees could make a lot less than more junior employees. Hence Blankfein's complaint that the pay restrictions are "going to limit our ability to compete, both here and abroad."

Sounds plausible in principle, but I'm not sure I buy it. If I'm a Goldman employee who made, say, $5 million in 2008, and I have to take a $4 million pay cut this year, I'd feel pretty confident this would not go unnoticed by my higher-ups, particularly since I'd probably be one of those higher-ups. In fact, I'd be willing to bet that the relevant Goldman official would remember I took such a pay cut and make it up to me once we returned the TARP money. I guess you can't actually write a contract to this effect, because the contract would presumably be worth the discounted value of the extra $4 million and might put you over the compensation limit. (Though, who knows, there are probably ways to pull this off legally. Maybe you could structure it as a backloaded salary, not a bonus...) But Goldman is a reputable firm that prizes "employee loyalty," as they say in the big-box retailing sector. I'm guessing I'd feel like my bosses were good for it.

On the other hand, if I were a mildly antsy Goldman employee who'd given a lot of thought to decamping for a hedge fund even before TARP, this might be my impetus to leave. But then Blankfein's problem isn't TARP per se, it's that he already had some unhappy campers.

I guess what I'm saying is that this stuff may have some effect at the margins, but it's hard to believe it goes beyond that. At least at a firm like Goldman, where people generally want to work and can be confident the TARP money will be returned/restrictions lifted sooner rather than later.

This stuff, on the other hand, sounds like a real indignity:

Employees visiting New York now stay at an Embassy Suites hotel rather than the tony Ritz-Carlton where they used to bed down. ...

All costs were being scrutinized by then, due to heightened public scrutiny and declining profits. Goldman employees working late now are entitled to only $20 in reimbursement for dinner, a 20% reduction. Car-service rides home aren't free until 10 p.m., an hour later than before. 

Question: How many of those 953 millionaires are demanding that $20 dinner reimbursement? I'd be willing to bet the number isn't zero.

--Noam Scheiber