I’ve seen variants of this argument in defense of permitting bailout banks to pay massive bonuses from various parts of the political spectrum, but it makes no sense at all:
We cannot legislate to cap bonuses or pay. There is no room in a free society for a law that curbs the pay proffered in private companies.
This may be true, the problem is that a society that hands over billions of dollars in public money to private companies is no longer a free society. If the government can hand money to the banks, it can take money away from the banks just as easily. So, this is a bogus and illogical line of defense.