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Updates to add mention of the sell-off in stocks following the report

.

NEW YORK (

TheStreet

) -- Washington is following up on

President Obama's pledge

to crack down on excessive compensation at the country's most troubled financial firms.

The Treasury Department is planning to announce 50% pay cuts, on average, compared with 2008, for the best-paid executives at

Citigroup

(C) - Get Citigroup Inc. Report

,

Bank of America

(BAC) - Get Bank of America Corp Report

,

American International Group

(AIG) - Get American International Group, Inc. Report

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,

General Motors

,

Chrysler

and the two automakers' financing arms, according to the

New York Times

. Salaries, excluding bonuses and retirement packages, are set to be chopped by 90%.

Kenneth Feinberg.

News of the plans, which were later also reported by the

Wall Street Journal

, sent the U.S. equity markets lower late in Wednesday's session. The blue-chip

Dow Jones Industrial Average

closed down more than 90 points, finishing just above its low for the day.

The

Times

reports that no executive at AIG will earn more than $200,000 this year. The insurer has received $180 billion in bailout pledges, and is now 80% government-owned.

At all seven entities, anyone receiving more than $25,000 in perks will have to get the plan approved by pay czar Kenneth Feinberg.

Speculation about big year-end bonuses at firms like

Goldman Sachs

(GS) - Get Goldman Sachs Group, Inc. Report

has set Feinberg on a mission to crack down on the companies over which he maintains authority.

While Goldman shed its bailout shackles in June, Citigroup was pressured into selling off its Philbro unit after news emerged that its manager, Andrew Hall, might receive $100 million in compensation. Citi is 34% government-owned, having received $45 billion in direct funds, and hundreds of billions of dollars worth of guarantees on other toxic assets.

Also at the suggestion of Feinberg, Bank of America's departing CEO Ken Lewis

agreed to forego his 2009 pay package

. BofA has also received $45 billion in cash from the Troubled Asset Relief Program, which it is eager to begin paying down.