Dean Baker has got a very credible alternative theory. Maybe Paulson's not a lone gunman here, Congress may also be to blame. Rather than actually limiting executive compensation, just tell everyone you limited it.
Let me suggest an alternative hypothesis. Perhaps Congress really did not want to cut executive compensation on Wall Street. After all, word has it that members of Congress gets lots of campaign contributions from very high paid Wall Street executives.
Of course, giving taxpayer dollars to the richest people in the country is not very popular with ordinary taxpayers. So, it might be in the interest of members of Congress to appear to be trying to rein in executive compensation on Wall Street, even if this is not their real intention. In other words, the restrictions of executive compensation put in the bailout bill were just a charade for the kids.