WASHINGTON — Executive compensation restrictions included in the economic stimulus bill signed into law Tuesday are sloppy, riddled with holes, and leave banks that received government assistance in limbo over how to comply, industry representatives said.

The restrictions, which were added by Senate Banking Committee Chairman Chris Dodd, are meant to respond to public anger and crack down on financial institutions that have received government aid.

But industry representatives complained Tuesday that the bill's fine print would have far-reaching unintended consequences and was so full of ambiguities that banking lawyers were at a loss over how to interpret several basic provisions.

"It's very confusing. If you read it literally, it's very frightening what the implications are," said Steve Eisen, a bank regulatory expert at Baker, Donelson, Bearman, Caldwell & Berkowitz PC in Nashville. "Bank boards were meeting last week and saying, 'We don't know what to do.' "

The restrictions stipulate that the top-paid employees at banks that have received Troubled Asset Relief Program funds must halt incentive compensation like bonuses and retention rewards.

The law makes allowance for long-term restricted stock payments so long as payment does not amount to more than one-third of an employee's pay and does not fully vest until the institution has repaid the government. But it is unclear how much stock is allowed, lawyers and industry representatives said.

The law does not even define compensation — is it just base salary, or as many presume, does it also include bonuses, benefits, and other perks.

The confusion does not end there. The ban on incentive compensation covers employees on a sliding scale, with the banks receiving the smallest amounts of Tarp dollars restricting the fewest number of employees and those receiving larger sums restricting more personnel.

The compensation constraints have a carveout for employees with employment contracts that included bonuses and were entered into before Feb. 11, but it is unclear if those executives would still be counted.

For example, if 10 of a big bank's highest earners had bonus contracts in place, would the exemption reach down and require the bank to cover 10 more? Industry lawyers and lobbyists said they do not know.

Several observers said banks could get around the law by raising base salaries instead of granting bonuses. Mr. Eisen said a community banker client of his already told him that he would just tell his board to wipe out his 20% bonus and tack it on to his base salary.

Mr. Eisen said it appears lawmakers failed to think through some of the ways other parts of the bill would affect community bankers in particular.

"The problem with a lot of this legislation is that the thought process ... was totally focused on the really big banks," Mr. Eisen said.

The broad language in a provision banning golden parachutes, he said, could mean that a banker with a noncompete contract would not be able to work in the industry for a year. In other cases, if a top banker with a life insurance plan died rather than quit or was fired, the banker's spouse might be left without any death benefits.

Bankers are "outraged" at the restrictions, according to Ed Yingling, the president and chief executive of the American Bankers Association. He said many bankers were encouraged by regulators to take Tarp money and are now being hit with penalties as a result.

Bankers "believe it was a total bait and switch," Mr. Yingling said. "They were called by their regulators and asked to participate. … And it's not where the abuses were."

The chances of overturning the provisions with later legislation are slim, Mr. Yingling acknowledged, but he said the industry should work with the Treasury and regulators as they implement the law.

Camden Fine, the president and CEO of the Independent Community Bankers of America, said community bankers should have been exempted. "There should have been no restrictions on the community banking industry," he said. "I don't think that is what the amendment was trying to address, and yet they did go after a good many community banks."

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