Bailing out healthy banks

A TPM reader posits:

First off, I think it all stinks. I'm nauseated. I'd prefer a massive bankruptcy reorganization and fire sale.

BUT... if you are going to bail out any bank, you have to bail them all out. Why? Because otherwise you're creating a competitive disadvantage for those who don't participate. You reward the ones who have taken the most risks and punish their competitors if you don't.

Well, yeah, but only if the bailout has no strings. This is why, unlike some, I think there probably is real relevance to the idea of capping executive compensation as part of the bailout bill.

Under such a plan, the banks that lost their shirts and need a bailout can take one, but not before first agreeing to place their executives on a GS payscale, and accepting other punitive measures as well. Bankers that have played it safe over the last 10 years might feel as if their competitors are getting a free ride on all the risk they took, but they'll still be able to earn ungodly amounts of money and invest their firm's capital as they see fit. And, for that matter, the bright minds of the banking future are more likely to place themselves at banks that don't limit their earnings potential, future investors are likely to take the competence of these banks into account, and so the banks that eschew the bailout might also benefit from a bounce in reputation that has real financial value to boot.