I have to admit that I don't like the idea of the government stepping in to dictate compensation levels, TARP funds or no TARP funds. I'm certainly not morally opposed to it -- heck, many of these people deserve far worse.
The problem, though, is that I don't think the government is institutionally competent to figure this stuff out in a remotely fair and informed way. It seems like the bluntest of blunt instruments.
Instead, I'd prefer to let people make what they make, and then raise taxes significantly on the very top earners. For that reason, I'd prefer to see the anger from these ridiculous compensation levels (which were made possible by government intervention, mind you) channeled toward larger tax reform.
The compensation limits proposed this week will be fleeting anyway -- the ultimate purpose is to keep us rubes at bay. Raising tax rates on the very very top, by contrast, would be a more lasting reform -- one that would promote equality, reduce concentration of political power, etc.