Still, should President Obama incorporate banking sector compensation reform -- or broader compensation limits, such as those proposed by U.S. Claire McCaskill, D-Missouri -- into expected legislation to reform the financial system, his administration will have added another layer on to the urgent and very serious concerns of financial system stabilization, and how to deal with the trillions of dollars of toxic assets (no value / low value assets) on banks' balance sheets.

That's not to say that compensation is not excessive and is not worthy of public policy attention; it is, but when cast against the serious clouds of constrained credit markets, systemic risk and a pronounced U.S. recession, given the contentious nature of compensation limits, prudence would suggest that the issue will have to wait for another day, even after the shameful, egregious conduct that has appalled so many Americans.

A matter of priorities

The Obama administration's predicament is akin to a homeowner who may have a leaky roof: you can note that the house needs landscaping and other beautification work, but the first priority has to be fixing the roof, or else none of that beautification work is going to mean much. And so it is with Wall Street compensation: beautification will have to wait.

For investors, the above will extend 'an unknown' into the future. Investors won't know what form the investment banking sector will take -- including the shape of compensation incentives for executives and other employees -- perhaps for a half year of more. Hence, that suggests holding off until the rules of the game have been clarified, or at minimum, moving forward with a decision to investment in a large bank and / or a related financial services play, with caution.

Fiscal Policy / Economic Analysis: Underscoring, American taxpayers may want tight controls on bank compensation, including bonuses, and that is their right. After all, they're allocating hundreds of billions of tax dollars -- in direct and indirect aid -- to banks and other financial institutions. And the above doesn't include the trillions of dollars the U.S. Federal Reserve has allocated to the financial system via its interventions.

Still, given the enormous problems of the U.S. recession, credit market stress and overall banking sector reform, as well as upcoming initiatives on health, energy and education policy, the Obama administration may justifiably delay action on bank compensation until the end of the year, or even later. With the U.S. economy so weak, that's the best plan for action.

Financial Editor Joseph Lazzaro is based in New York.