Amid populist outrage over Wall Street excess, President Barack Obama unveiled compensation rules for financial institutions that accept "exceptional" government assistance, saying it is "in bad taste" and bad strategy for banks to give executives lavish pay packages during an economic crisis.

"We're going to be demanding some restraint in exchange for federal aid - so that when firms seek new federal dollars, we won't find them up to the same old tricks," Obama said at the White House.

The president was joined by Treasury Secretary Tim Geithner, who will release more details the administration's new financial rescue package next week, a strategy widely expected to cost more than the $350 billion remaining in the Troubled Asset Relief Program.

The new rules on executive compensation announced by the White House moments before Obama's speech include a cap on salaries for executives at companies that receive "exceptional" government aid. That standard applies to firms that have bank-specific negotiated agreements with Treasury, such as American International Group Inc. (AIG), Bank of America Corp. (BAC) and Citigroup Inc. (C).

Under the new rules, companies that already have received rescue funds from the Treasury Department will have to comply with existing regulations. But top executives at firms that receive exceptional assistance going forward won't be allowed to make more than $500,000 a year. Any additional compensation would be made in restricted stock that won't vest until taxpayer funds have been repaid.

The regulations, designed to address populist rage at Wall Street excess while not discouraging banks from participating in the Treasury's Troubled Asset Relief Program, are stricter than existing regulations. Under the old rules, recipients of government assistances couldn't take a tax deduction on executive compensation above $500,000.

"This is America. We don't disparage wealth," Obama said. "We don't begrudge anybody for achieving success. And we certainly believe that success should be rewarded. But what gets people upset - and rightfully so - are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers."

-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256; henry.pulizzi@dowjones.com