Wall Street Pay in Obama's Crosshairs

Updated from 2:13 p.m. EDT

The Obama administration on Wednesday took its first swing at Wall Street pay, outlining broad guidelines for compensation at financial firms and more stringent rules for those that have received bailout funds.

The Treasury Department will be closely monitoring the pay packages of employees at firms that received funds from the Troubled Asset Relief Program. The interim regulations plan to cap bonuses of top executives and highly paid employees, impose clawback provisions and limit the use of "golden parachutes."

The Treasury is also appointing well-known attorney Kenneth Feinberg, who oversaw the distribution of payments to 9/11 victims, as a "special master" to review compensation practices.

Feinberg will be charged with scrutinizing any pay packages exceeding $500,000 and renegotiating those that seem excessive. In addition, firms will have to limit any "luxury" spending -- an apparent response to public outrage over big-ticket spending for office renovations, marketing events, resorts and travel at firms like American International Group (AIG), Merrill Lynch and its new owner, Bank of America(BAC).

TARP recipients will also have to improve transparency and accountability for compensation practices. Firms will have to install "say on pay" provisions so that shareholders have an opportunity to vote for or against them, and they'll have to disclose more about executive perks and consultants. Furthermore, executives will not be allowed to take advantage of "tax gross-ups" that distribute additional payments to cover taxes on compensation.

Treasury Secretary Timothy Geithner also outlined four broad goals for new regulations across the financial sector earlier on Wednesday after meeting with Securities and Exchange Commission Chairwoman Mary Schapiro and Federal Reserve Governor Dan Tarullo.