President Obama has introduced a new plan that would place a $500,000 cap on executive salaries for U.S. firms receiving bailout money. This pay cap would  apply to institutions that have made agreements with the Treasury Department for assistance in the future. Obama is also going to put to an end the massive severance packages for executives that are leaving failing firms. Obama said:

“We’re taking the air out of golden parachutes.”

Under the plan, if companies want to pay their executives more than the $500,000 salary, they will have to do it through stocks that cannot be sold until the companies pay back the money they borrow from the government.

Firms will also have to disclose all the “perks and luxuries bestowed upon senior executives and provide an explanation to shareholders and taxpayers on why these expenses are justified.”

Obama told reporters:

“For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis isn’t just bad taste– it’s a bad strategy–and I will not tolerate it. We’re going to be demanding some restraint in exchange for federal aid– so that when firms seek new federal dollars, we won’t find them up to the same old tricks.”

Obama announced the drastic government intervention plan at the White House. Treasury Secretary, Timothy Geither, was at his side. This is said to be the first step, and it will be followed next week with the unveiling of the president’s new plan for the spending of what remains of the $700 billion financial industry bailout that was created last year. Geither had this to add:

“There is a deep sense across the country that those who were not responsible for this crisis are bearing a greater burden than those who were.”