Do you hear that? Listen very carefully and, if you can’t hear it now, pretty soon you’ll detect the sound of braying—the complaints of free-market types that a sacred cow is in the act of being slaughtered. Today word crept out of Washington that the Obama administration’s bailout compensation czar, Kenneth R. Feinberg, is ordering deep pay cuts for the top executives of Wall Street banks and other companies that received the most federal bailout money.

The list includes Citigroup, Bank of America, and American International Group, as well as General Motors, Chrysler, and their financing arms. At AIG, media reports say that compensation will max out at $200,000, and at all the companies, executives will have to apply to the government for any special perks that are worth more than $25,000: country-club memberships, private planes, limousines, or company-issued cars. Mark Herr, an AIG spokesman, declined comment on the reports.

Under the plan, the pay of the top-25 executives at these companies, 175 in all, will have their total compensation including bonuses cut by 50 percent and salaries cut by 90 percent. According to the Wall Street Journal website, Feinberg will “demand a series of corporate-governance changes at the firms, including splitting the positions of chairman and chief executive officer, requiring boards of directors to create a committee to assess risk, and eliminating staggered boards.” Gee, you’d think these companies had a governance problem, or something.

None of this is unprecedented, certainly not internationally. The British government rewrote the compensation policy of Royal Bank of Scotland after that bank was taken over, and five of the largest British banks agreed to curb their bonuses after the G20 meeting. President Sarkozy pressed French banks to eliminate bonuses for traders who rack up losses.

With the world community acting against over-the-top compensation, one valid-sounding argument that can be made against pay restrictions—that it drives traders and execs overseas—becomes less daunting. One might argue that pay cuts will make the affected banks less competitive with domestic rivals not affected by the cuts. But I suppose that's the price they pay for the practices that led to the bailout. And a small price at that.

Obviously there’s a certain heavy political component to all of this. It’s hard to find any executives more despised than the ones at the companies that have gotten a federal handout. But there are also sound policy reasons to engage in federally imposed pay restrictions. The reasons boil down as follows:

· The Humiliation factor. There’s no question that the government is openly humiliating the executives of the companies involved. Indeed, it would be nice to see a list of the executives whose pay has been restricted, with a comparison of pre- and post-restriction payments. The reason is that the government, in embarking on the bailout in the first place, pretty much threw away the principle of “moral hazard”—that companies which require bailouts, and their executives, would personally suffer as a consequence. The pay restrictions, by humiliating the executives, serves as a kind of message that there will be a certain amount of hazard involved in getting government aid in circumstances like this, even if it’s only a modest amount of public shame.

· Equity. When a poor person goes on welfare, the government very often places a lien on his or her house, if he has one, and expects the recipient to pay back the aid or to engage in useful work—workfare. It’s not pleasant to sweep the streets or work in the parks in return for being on the public dole, but that is the law. These companies are recipients of a form of corporate welfare. It’s not pleasant for the executives of these companies to earn a mere base of $200,000, but it beats scrubbing toilets in public restrooms.

· Public morale. Sure, there’s an element of public relations in this move. And what’s wrong with that? President Obama entered office on a promise to enact change, partly in response to public anger over the excesses of the preceding years. There has been little visible payoff to show for his efforts. The economy is still anything but recovered. The pay restrictions are a gesture, but the public needs assurance that genuine change is underway.

Weep not for these executives. Even after the pay cuts, total compensation including bonuses could run into the millions. During the flush years they enjoyed enormous paydays and gave back far less of their windfall to charity than their counterparts in days of old (and no, a few thousand bucks to buy a ticket to the Robin Hood Foundation annual gala doesn’t count). Their bank accounts are flush. Their consciences, if they have any, may or may not be clear. That’s their business. The public’s business, now that they’re on the dole, is how much money they make.

Mr. Feinberg, do your duty.