“On the executive compensation thing, it went to the core of their being. It was like asking the chief rabbi of Jerusalem to eat bacon on Yom Kippur. It was the most unthinkable thing they could think of.” — House Financial Services Chairman Barney Frank, on trying to limit the pay of bankers who are beneficiaries of the $700 billion federal bailout.

Blank Check for Banks, Pink Slips for Detroit

That was the headline on Sunday’s business story in The New York Times by the indispensable Gretchen Morgenson, and it’s a splendid summary of the economic policies being pursued so vigorously by the Republican minority in the United States Senate.

Morgenson quoted Mitch McConnell, the Republican from Kentucky who is leading the fight to kill off the Big Three as quickly as possible: “We simply cannot ask the American taxpayer to subsidize failure.”

To which Morgenson replies: “That’s a new concept…”!

Maybe the Republicans are suffering buyer’s remorse over the previous $700 billion bailout, but the ironies here are endless, and Morgenson is on to all of them:

* “[I]n the bank rescue, taxpayers are subsidizing not only failure but also outright recklessness and greed.” (Lest we forget: the banks knowingly loaned $3.2 trillion—yes, trillion—to home buyers with bad credit and undocumented incomes.)

* “The supposedly exorbitant autoworker wages that get everybody so riled up pale in comparison with the riches of Wall Street.”

* Unlike Detroit, no one asked the bankers to sell their private jets or “supply Treasury with in-depth restructuring plans in exchange for bailout funds.”

* The “Troubled Asset Relief Program is open to banks that are both well and sickly. And nobody overseeing the program seems eager to ensure that its funds go only to those institutions that will survive and be able to pay back the taxpayer.”

* Treasury has no way to determine if the program is achieving its goals of increased lending by banks.

* There also seems to be no monitoring of the banks’ compliance with TARP limits on executive compensation.

Actually, there are no real limits on the bankers’ compensation at all. That was the exciting news in this morning’s Washington Post. The Bush administration, apparently in response to the rabbi-like objections cited by Barney Frank above, slipped a loophole into the bill which so far has ensured that the federal government can’t do a thing about bankers’ salaries or bonuses.

According to Post reporter Amit R. Paley, “at the last minute, the Bush administration insisted on a one-sentence change to the provision…The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.”

Guess what: “In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives.”

Undoing this classic example of Washington legerdemain should be a priority of the new Congress that’s about to take office, but don’t hold your breath. As Eric Lipton and Raymond Hernandez reported on the front page of yesterday’s Times, prominent Democrats like Chuck Schumer are often just as willing to do the bidding of Wall Street as their Republican colleagues.

For example, when a few people in Congress moved to close an outrageous loophole which freed hedge fund managers from millions of dollars in income taxes, Schumer claimed to be in favor of the reform—but then backed a bill that would also cover executives at energy, venture capital, and real estate partnerships. “His position was identical to that of lobbyists for a group paid by Mr. Kravis and other finance industry executives,” the Times reported. The Schumer bill was called a “poison pill” by the leading Republican advocate of the tax increase, and it “went nowhere after provoking opposition from an array of industries.”

Charles Kaiser is the author of The Gay Metropolis and 1968 in America. He has been media editor for Newsweek, a member of the metro staff of The New York Times, and a reporter for The Wall Street Journal, where he covered the press and book publishing. To learn more, visit charleskaiser.com.