QUITE A LOOPHOLE…. When lawmakers considered the $700 billion bailout package a few months ago, they argued with the Bush White House over restrictions on executive compensation. Democrats insisted that firms accepting bailout funds could not, in turn, lavish their top executives with multi-million dollar salaries and/or “golden parachute” severance pay. The president wanted no such restrictions.

At first glance, it was a fight Democrats appeared to win, and strict limits were included in the final legislation. Indeed, there was even an IRS mechanism that mandated a close review of executive compensation, and tax penalties for companies that failed to comply.

Apparently, lawmakers neglected to read Bush’s fine-print.

[A]t the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.

Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts. In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives.

“The flimsy executive-compensation restrictions in the original bill are now all but gone,” said Sen. Charles E. Grassley (Iowa), ranking Republican on of the Senate Finance Committee.

The hard-fought “concession” from the administration was, in practice, something of a joke.

Steve Benen

Follow Steve on Twitter @stevebenen. Steve Benen is a producer at MSNBC's The Rachel Maddow Show. He was the principal contributor to the Washington Monthly's Political Animal blog from August 2008 until January 2012.