Kenneth Feinberg (Kenneth Feinberg news) has a big decision on his hands. He has been looking deeper into pay practices involving bonuses given out in 2008, reports FOX Business. And he has apparently decided there were some pay abuses that might need correcting--and that has the top banks nervous.

Recall that the Treasury's special master on compensation was given authority to set pay limits via TARP (TARP news), an authority that he exercised vigorously. Now, under a new statute, the $800 billion federal stimulus package passed in February 2009, Feinberg is exercising his authority to look at Wall Street pay in the aftermath of the 2008 bailouts. He doesn't have the ability to clawback funds, but he can "use the bully pulpit of his office to embarrass firms into returning the cash." Firms are apparently girding for battle.

Goldman Sachs (NYSE: GS) paid out $4.8 billion in bonuses in 2008, despite receiving $10 billion in bailout money and countless billions more through the government bailout of AIG. These payouts eventually drew withering criticism for Goldman Sachs. So a bit of showdown is brewing. Feinberg has the upper hand, given the PR bloodbath Goldman Sachs and other top banks have endured. My guess is they will try to work out an arrangement that allows the Treasury to look tough and allow the banks to save face a bit. Goldman Sachs certainly doesn't want another public showdown on its hands. 

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