The Obama administration and Congress will this week wade into the debate on executive compensation, paving the way for limits on short-term bonuses and appointing a new official to vet companies.

Kenneth Feinberg, a lawyer and former head of the 9/11 compensation fund, is set to be appointed to a new role overseeing banks’ compensation schemes to ensure that they do not reward unnecessarily risky behaviour.

As Special Master of the 9/11 fund, Mr Feinberg was charged with setting appropriate levels of compensation to the families of victims of the terrorist attacks on New York and Washington. He was criticised from the outset as being brusque and confrontational.

Charles Wolf, who lost his wife in the attack on the World Trade Center, was a critic. His website “Fix the Fund” accused Mr Feinberg of being “everything the Founding Fathers of this country were striving to avoid when they wrote the Constitution”.

The Special Master was, Mr Wolf wrote, “lawmaker, administrator, judge and jury” when deciding how much individual relatives and victims should receive.

As hearings into individual cases continued and the rules were refined, Mr Wolf changed his mind. In a letter to Mr Feinberg in November 2003, he said he was now “without any fear that I will be lumped in to some statistical spreadsheet, and with a feeling of faith that I can truly and literally put my future in your hands”.

Eric Turkewitz, a New York lawyer who represented two of the victims, said he remained impressed by the stamina of Mr Feinberg. “He was a tremendous public servant,” he said. “This is a guy who was personally hearing cases from early in the morning until late at night. How he did it and stomached it and stayed fresh for it after tale after tale I don’t know.”

After the stress of listening to hundreds of stories of the lives and deaths of 9/11 victims, the compensation debate pales in significance. But the storm over the bonuses paid to executives at AIG, the bailed-out insurer, and the presumed link between pay and the financial crisis remain flash points between Washington and Wall Street.

Details on how the administration plans to overhaul oversight of compensation could come as soon as Wednesday, according to people involved in the process. Gene Sperling, a senior Treasury official, will testify at the House financial services committee on Thursday. Barney Frank, Democratic chairman of the committee, is due to examine how to reform compensation oversight before drafting legislation with the administration.

There will be no salary caps placed on executives, but financial institutions will be instructed to report changes to pay structures and regulators will be encouraged to intervene if bonuses are deemed to encourage risky short-term trading at the expense of long-term solvency.

Part of the pay proposals will affect banks that have taken government money through the troubled assets relief programme. But the administration is also keen not to force too large a cleavage between Tarp recipients and those that did not take government money: all banks will face more scrutiny.

For Mr Feinberg, who will be doing much of that scrutiny, the rules are as yet unclear. But plenty of people in Congress and the administration are wary of charging ahead.

It was a lack of detail in law that led to some of the initial criticism of Mr Feinberg’s handling of the 9/11 compensation fund, which he later overcame. “He was starting with a blank sheet of paper,” said Mr Turkewitz. “The legislation had been put together very quickly.”

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