The Obama administration's decision to trim the compensation of the top executives of seven banks and companies that received and still hold big amounts of public bailout funds was right.

The Treasury Department on Thursday ordered American International Group, Bank of America, Citigroup, Chrysler, Chrysler Financial, General Motors and GMAC to cut the pay of their 25 highest-paid executives.

The executives' lavish compensation, each in the millions, comes as the public experiences nearly 10 percent unemployment. Six people are seeking work for every position that's open. Apart from the misery of the unemployed and the underemployed, Americans also are adjusting to cuts in public services due to drops in tax revenues in the damaged economy.

The intention of Treasury's sanction, apart from reminding the executives that it is the public's money their companies are running on, is to discourage them and leaders of other firms from returning to the risky, deceptive, irresponsible practices that brought the U.S. and world economy down, leading to the billion-dollar bailouts.

Toward that end, the Federal Reserve also released a proposal that would oversee banks' pay practices to prevent them from encouraging employees to take the kind of gambles that triggered the crisis. The plan would affect thousands of banks, many of which did not receive a bailout.

There are gaps. One is that companies like Goldman Sachs, JPMorgan Chase and Morgan Stanley, flying high again with huge profits based in part on new and old, complex, opaque practices, will not be subject to the limits imposed on the seven because they have already paid the government back their bailout money. The way to reach them would be for the Obama administration to state flatly that, in spite of their claimed "too big to fail" status, if they get into trouble again the government will just let them sink like a stone.

This isn't revenge. It is preventive, protective action that the government is taking on behalf of average Americans. Their interests need to be kept firmly in mind as the Obama administration begins to claim that the recession is over.

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