(BEGIN VIDEO CLIP)

KENNETH FEINBERG, SPECIAL MASTER FOR COMPENSATION: Vindictiveness, punitiveness is not part of this program at all. It is nowhere mentioned in the statute. It is irrelevant.

But getting the taxpayers' money back, that is the primary objective. And if I can do that in a program that reforms the compensation structure, the incentives, less cash, more long-term stock paid to these guys that is tied to future performance of the company so the value of the stock will depend on how well that company does in the marketplace, that is another goal of the program.

(END VIDEO CLIP)

BRET BAIER, "SPECIAL REPORT" HOST: The special pay master Kenneth Feinberg, who is obviously not from the south, he is also the pay czar for the president, he announced today that the government-ordered salary cuts of 90 percent to the highest 25 employees of these seven companies, seven large corporations that received hundreds of billions in bailout funds from the U.S. They haven't paid back those loans.

Now there is a cap on how much the top employees can make at each one of those companies.

What about this announcement, this plan, and the reaction? Let's bring in our panel, Fred Barnes, Executive Editor of The Weekly Standard, Mara Liasson, national political correspondent of National Public Radio, and the syndicated columnist Charles Krauthammer - Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I have no objection in principle at all about these cuts in pay. This is not intrusion into free enterprise. These enterprises are not private or free. They are wards of the state. They ran themselves into the ground, and they are now partially or largely owned by the government. So the government has every right to intervene and dictate salaries.

But the question is a practical one. Is it smart if you're a shareholder in the company, as we all are, and thinking of its future and the ability to repay the loan, is it smart to institute a cut this drastic?

The obvious danger is that if the cut is too large, it will induce the people who run it and who presumably know how to run it to go elsewhere.

So, to me, it is a practical decision, and the fact that Obama was hands off on this and he left it in the hands of someone whose expert in this area I think is the right decision. Obama is not an executive. He is not a businessman. He ought to leave it to Feinberg, who in these negotiations has become expert, so I think it was handled the right way.

BAIER: Mara, the companies who took bailout funds and repaid those loans do not have the stipulation of a cap, and there are actually some out there that think they should.

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: Well, they paid their bailout money back with interest, and that was supposed to be kind of the punishment, and they fulfilled that contract.

I think that legally these are the only group of companies that the government could do this to, and I agree with Charles. There is nothing wrong with doing this.

And I think the more important thing is getting regulations in place that will not have these companies get into this situation again. And maybe, as Ken Feinberg said in that cut we just played, that they will just have to do with how they are compensated.

In other words, why shouldn't an executive pay be tied to the performance of their company? That just seems like the most basic thing. Every small business owner's in America pay is tied to the performance of their company.

BAIER: Fred, besides the concerns Charles raises about the possible brain drain at these companies, are there fundamental concerns about how this has all come together?

FRED BARNES, EXECUTIVE EDITOR, "THE WEEKLY STANDARD": Yes, I certainly have them. I don't know why they are pooh-poohing this thing for another day at the office for Ken Feinberg.

This is unprecedented. We haven't seen this before where they are coming in and telling people how much they can make. Look, if you're really interested, Bret, in stopping these companies from taking excessive risks, there are ways to do that. Have them raise their reserve requirement, you know, they have to have more cash on hand.

One of the problems that so many on Wall Street got in so much trouble is because it was 30 or 40 to one, in other words, how much they had laid out in investments and loans and that one was how much they had in reserve. So if you're really interested in that, well, in the risk factor here, you don't cut their pay. That won't have any effect. Really, come on now. There is a good way to do it. And the second thing is this could go well beyond what they have done with these seven companies. Increasingly a part of the liberal agenda is to force American executives to be paid less. It offends them. It ideologically offends liberals. And right now, they don't have the legal authority to do that. They can do it with these firms. But just think about companies that are defense contractors. I mean, they're in the hock for all these government contracts and so on. And what about the companies that participate in the Medicare prescription drug program, and they're allowed to come in...

(CROSSTALK)

LIASSON: ... it is different than being owned by the government. We own big chunks of these companies. The taxpayers own huge amounts of AIG.

BARNES: They can legally do this now, but - Mara, you have heard it. Charles, you have heard it. You hear them on Capitol Hill talk about it, Barney Frank talk about these executives, executives for American corporations, they think, liberals think make too much money, and they would like to have them make less.

KRAUTHAMMER: If and when that happens, I will savage it, as you have savaged today's cuts.

But you say it is unprecedented. Well, the situation with these companies is also without precedent. We have never had huge institutions go bust and be saved by the government, which essentially owns it. There is nothing wrong at all in principle with regulating a company that you own. It's not an attack on -

BARNES: I understand that.

KRAUTHAMMER: It's not an attack on private enterprise. This is not private. It's quite simple.

BARNES: But Charles, this is not just something done because it is good for the company and it will cut down on excessive risk. This is ideological punishment. That's an element in there.

BAIER: A camel's nose under the tent, a phrase that Charles has used before, but not in this instance.

KRAUTHAMMER: If the tent starts moving, I will be here to object to it.