Jan. 30 (Bloomberg) -- President Barack Obama and Democrats in Congress are moving to cap Wall Street bonuses and pay.

White House spokesman Robert Gibbs said it’s “very safe” to assume that new rules guiding the administration’s financial rescue will address bonuses and executive pay.

Earlier today, Senate Democrats took the first step toward limiting pay for workers at companies receiving federal bailouts. Senator Claire McCaskill of Missouri introduced legislation to restrict compensation at such companies to $400,000, the equivalent of the U.S. president’s salary. Another measure being proposed would create a court to restrain executive compensation.

“We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer” by taking multimillion-dollar bonuses, McCaskill said.

Companies have continued to award bonuses after accepting funds from the $700 billion taxpayer bailout enacted by Congress last year. The Treasury Department has injected about $200 billion into banks across the country through its Troubled Asset Relief Program.

Bank of America Corp. is under pressure to scale back payouts after New York Attorney General Andrew Cuomo subpoenaed executives this week for information on compensation. Former Merrill Lynch & Co. Chief Executive John Thain was asked by Cuomo’s office for information about payouts made before the largest brokerage firm was acquired by Charlotte, North Carolina-based Bank of America.

McCaskill’s Cap Executive Officer Pay Act would ban any director, executive or other employee of a company receiving bailout funds from receiving more than $400,000 a year in total compensation, including salary, bonuses and retirement contributions.

‘Disappointed Parent’

At the White House, Gibbs said Obama is like a “disappointed parent” on the issue. The president yesterday said the $18.4 billion in bonuses handed out by banks are “the height of irresponsibility.”

Senator Chuck Grassley of Iowa, the Senate Finance Committee’s top Republican, endorsed Obama’s remarks.

“CEOs who run their companies into the ditch should beg for forgiveness, not rewards,” Grassley said in a written statement. Obama should “use his full power to pull back bonuses for bailout recipients,” he said.

Senator Sheldon Whitehouse, a Rhode Island Democrat, said he will propose a “temporary economic recovery oversight court” that would give the government the power to “take reasonable steps to restrain the massive self-indulgences that these masters of the universe have become accustomed to.”

White House Pay Freeze

Michael Franc, vice president of government relations for the Heritage Foundation, a Washington free-market policy group, noted that Obama froze the pay of senior White House staff on his first day in office. He said corporate pay caps are a real possibility in the current political environment.

“The moment government acquires any sort of equity interest in a company, the next logical role for the government as investor is to try to do things the agents of government feel are fiduciarily in line with the taxpayer interest,” Franc said in an interview. “In a way it does make sense. That’s the slippery slope.”

In the House, Democratic Caucus Chairman John Larson is proposing the creation of an independent commission to investigate the extent to which Wall Street abuses contributed to the economic crisis.

The commission would have 90 days to report back to lawmakers about regulatory, tax and other changes that should be considered. It also would examine derivative markets, mortgage- backed securities and other financial sectors to determine whether regulatory changes are needed.

‘Blind Eye’

“Did your regulatory agencies turn a blind eye to market manipulation and unethical behavior?” Larson, the fourth- ranking House Democratic leader, said in a statement. “Are new markets being monitored with outdated regulation? These are all questions the commission would answer.”

The panel would recommend a possible “investors’ bill of rights” designed to protect 401(k) retirement plans, pensions and other savings “from corporate greed and mismanagement,” he said.

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net.

Last Updated: January 30, 2009 15:53 EST