Remember how we were all engaged in a brief national discussion about the wisdom and effectiveness of limits on compensation at financial firms that took money from the $700 billion financial rescue plan?

Well today the Federal Reserve lifted executive- compensation limits for companies that participate in the new Term Asset Backed Securities Loan Facility. You see, the TALF is basically the government's bid to fire up the engines of the securitization market by providing cheap credit to anyone who wants to buy bonds based on bundles of student loans, auto loans, credit card loans and Small Business Authority-backed business loans.

“Executive compensation restrictions are targeted towards ensuring that executives of institutions that receive government support are not unjustly enriched,” the New York Fed said in a Q&A document on its Web site. “Given the goals of the TALF and the desire to encourage market participants to stimulate credit formation and utilize the facility, the restrictions will not be applied to TALF sponsors, underwriters, and borrowers as a result of their participation in the TALF.”

Basically, this is a bid to get hedge funds and others who didn't get TARP funds to play with TALF dollars. Many banks are already covered by compensation limits under the TARP because they received capital injections. But those who didn't get the injections might be hesistant to get into the market if they worried about the compensation limits covering them.

(Hat tip: Bloomberg.)