(BEGIN VIDEO CLIP)

TIMOTHY GEITHNER, TREASURY SECRETARY: We do not believe it is appropriate for the government to set caps on compensation. We will not proscribe detailed proscriptive rules for compensation.

GIBBS: He will be able to ensure for those companies receiving exceptional assistance, for the top 100 paid employees, a compensation structure that he believes and the government believes is sound and appropriate.

(END VIDEO CLIP)

BAIER: This is the heat. Kenneth Feinberg, the pay czar, also known as the "special master," this is a position that has just been created, and he can decide whether to lower salaries of executives of companies receiving some of the biggest taxpayer bailouts.

But what else could he possibly do? We're back with our panel -Jeff?

BIRNBAUM: This is a slippery slope here. I don't think anyone denies that the federal government needs to keep careful watch over the companies that they have essentially nationalized or made very large investments in.

And the politics of compensation, obviously is very volatile, as we learned with the bonus explosion over AIG, that big insurance company.

But if you look at the fine print, what's going on here is that this will be part of a package in which the administration will seek to give shareholders and others more say over compensation of not just these companies but also of many - all publicly-held companies.

And I think it's quite clear that once Congress gets in the rhythm of looking at the compensation of the companies that they invest in with taxpayer money because of bailouts, they're likely to go even further.

BAIER: Although the treasury secretary said that they're not in favor of capping compensation, but that's what he is saying today.

LIASSON: As a matter of politics and just as a practical matter, you can't have the taxpayers owning big chunks of these companies and not have the taxpayers have some kind of say in what these people are going to make.

Now, the other issue, which is the say on pay issue, which is trying to get shareholders in general in all sorts of companies to have some kind of a say in the effort to make compensation more tied to performance, more rationally tied to performance, is a different matter.

I think that some people might see a slippery slope here. But if Kenneth Feinberg tries to do with anything but the top 100 employees in those seven firms, I think it would be jus Armageddon. I don't think he will be able to do that.

I do think it will be a big incentive for every one of these TARP fund companies to get out from under the government as fast as possible.

BAIER: Which is why the big banks want to get rid of -

LIASSON: Which might be a good thing or a bad thing. If they are zombie banks, you don't want them to do them.

HAYES: Count me as one of those people who is worried about the slippery slope.

I think so long as he restricts himself to looking specifically at these companies that are either owned or receiving government money, you can make an argument, you can make a defensible argument that this is something in the issue of watching taxpayers' money, that this is something that the government needs to be doing.

On the other hand, these things that we thought were inconceivable months and months ago we are now seeing, you know, with the government owning more than half of general motors and taking over some of these banks. These things that we thought were inconceivable last August are now happening.

So the operative word is this is what Feinberg is going to be doing now. This is what Timothy Geithner wants the rule of the pay czar to be now, and these are the guidelines that the Obama administration is talking about now.

What will they be in a year? I think once you open this up, then the question becomes, and this has long been sort of been a charging issue for the political left, the question then becomes, what's fair? And then you have a debate about what's fair, and who makes that determination will be the real debate?

BIRNBAUM: What is fair is definitely less than these people are making now in all likelihood.

BAIER: But who says that?

BIRNBAUM: It is always a problem to try to allow Washington to dictate anything to business, or business to think that they can dictate the way government works. These are very different entities. It is a classic dilemma and problem between Washington and New York.

LIASSON: But a company propped up and it is only being propped up by the federal government, then why should you making tremendous amounts of money?

BIRNBAUM: This is central problem to the entire debate.

In addition, there is not just a slippery slope, but a downward spiral involved here, which is that if you lower the compensation of the people you are relying on to get back the taxpayers' money, you're likely to lose those top-level executives, and therefore -

BAIER: Brain-drain.

WILLIAMS: - you will have a brain drain that will make it more difficult for the federal government to get the money out of these companies, because they won't be making as much money. You won't have the people making the best decisions available.

LIASSON: Why can't you just tie their pay to performance? Right now they are performing pretty abysmally.

BIRNBAUM: That is, in effect, I think what Feinberg is - he didn't say anything, but what Geithner alluded to, that there won't be an actual dollar cap. So there might be some incentive program, but it would be nothing like what the private sector now allows without government interventions.

BAIER: And finally, to quote Charles Krauthammer, it seems like there are more czars than at a Romanov wedding. This czar, whole phenomenon, Mara. What are we at, 20 or close to 20?

LIASSON: Now I think we are around 20. Other administrations have used them, but never to the extent that the Obama administration has used them.

And the answer we got today in the briefing was, look, there is so much that the regular cabinet agency personnel have to do that we can't really ask one of them to take on these tasks. We have to bring in somebody from the outside.

BAIER: It's interesting.

HAYES: You could call it bizarre. You could actually ask them to do less and then free them up to do all the other things the czars are doing.