How bad are things at Citi and Merrill BofA now that the pay czar is doing his duty? Very bad, if figures from last year are anything to go by.

Feinberg is focusing his efforts on 25 executives at each firm that received the most TARP cash. Starting from November, compensation for this cohort will fall by 70% at Citigroup, by 62% at Bank of America Merrill Lynch, and by 58% at AIG.

Salaries at all these firms will be limited to $500k (£300k), and up to 90% of salaries for executives will be deferred.

According to Bloomberg, Feinberg’s fix means only 66 executives across all seven companies (AIG, BofA, Merrill, Chrysler, GM, GMAC and Chrysler Financial) whose compensation he scrutinized will get more than $1m this year.

Figures from Andrew Cuomo reveal that last year, BofA, Citigroup, Merrill Lynch alone paid bonuses of $1m+ to over 1,600 people.

Will the reversal really be that extreme?

What’s an executive?

Maybe not. It all hinges on the definition of ‘executives.’ And according to compensation consultants, this remains vague. “It hasn’t been clear how the term is being applied,” says Jon Terry, head of compensation and benefits at PricewaterhouseCoopers.

Citigroup’s announcement on the subject reflects this uncertainty. The bank said Feinberg’s strictures apply to ‘senior executive officers and certain of our most highly compensated employees.’

This could give Citi and BofA Merrill the leeway to pay people outside the specified group of 25 as they see fit. However, if the most highly paid employees are automatically bumped into Feinberg’s line of vision, the pay caps (for this is what they are) will trickle down through each bank.

It remains unclear whether this is Feinberg's intention. Citi and BofA are clearly afraid of this. It emerged yesterday that 45 of Merrill’s 100 most highly paid staff have already left. And a spokesman for BofA told Bloomberg that rivals are, “identifying our top performers and using pay concerns to recruit them away for fair-market compensation.”

US banks that didn’t receive (or that have paid back) TARP cash will also find themselves constrained by new guidelines from the Fed. However, these are far less prescriptive, don’t involve compensation caps, and don’t even prescribe the percentage of compensation to be deferred.