The Obama administration plans to order that top earners at firms that received billions of dollars in government bailouts will see cash payouts cut by an average of about 90 percent from last year, a source familiar with the matter said on Wednesday.

The sweeping cuts, negotiated by the U.S. pay czar Kenneth Feinberg will mark a bold move for an administration that has recently railed against excessively high pay on Wall Street.

The total compensation for the top 25 earners at the seven firms will be reduced by an average of about 50 percent, the source said, speaking anonymously because the decisions have not yet been made public.

Feinberg said on Tuesday that he may publicly disclose his rulings before the October 30 deadline.

The companies affected are: AIG , Bank of America , Citigroup , General Motors , Chrysler, GMAC and Chrysler Financial.

A Treasury spokesman declined comment.

The source said the top earners at AIG's financial products unit -- largely blamed for risky bets that threatened the stability of the giant insurer -- will not receive more than $200,000 in total individual pay.

That unit became the illustration of Wall Street insensitivity when it was revealed its employees were receiving $165 million in retention bonuses, after taxpayers had already pledged up to $180 billion to keep the company afloat.

Feinberg is charged with approving or renegotiating the pay contracts for the top 25 earners at the seven firms that have received exceptional taxpayer assistance under the Troubled Asset Relief Program (TARP).

He said on Tuesday that he has spent the past four months working closely with the firms to try to come up with actual dollars that can be endorsed by these seven TARP recipients.

He said he believes he has basically succeeded in renegotiating pay, even for contracts over which he did not have explicit authority.

But Feinberg's decisions will not touch the Wall Street firms that have already repaid TARP funds, some of whose bonuses are already returning to pre-crisis levels.

In recent days some of the largest Wall Street firms have reported strong earnings and rebounding trading revenues -- and sizable pools for bonuses.

Goldman Sachs, which repaid $10 billion in government bailout funds a few months ago, is now on track to hand out more than $20 billion in bonuses, which could make this year a record. Morgan Stanley, which also repaid $10 billion in taxpayer funds, said on Wednesday that it stashed away $5 billion in the third quarter for year-end bonuses, lifting its bonus pool to $10.9 billion.

Federal Deposit Insurance Chairman Sheila Bair said on Wednesday that Wall Street firms should consider, at least temporarily, suspending eye-popping bonuses.

It distresses me, Bair said at the Reuters Washington Summit. I think it is in the enlightened self-interest of these large financial organizations to, you know, suspend these outsized bonuses at least, if not permanently, (and) realign compensation to more rational levels, shall I say.

High Wall Street bonuses have sparked public outrage as Americans face the highest unemployment level in 26 years -- 9.8 percent -- and programs to aid homeowners have been slow to take hold.

The administration has proposed a broad crackdown on pay, including giving shareholders more say on compensation packages, forcing firms to disclose more on their pay practices and encouraging regulators to shut down risky compensation schemes.

Treasury Secretary Timothy Geithner told the Reuters Washington Summit on Tuesday that it is deeply offensive to the public that financial firms recently on the brink of failure are able to pay massive bonuses to their executives.

(Reporting by Karey Wutkowski, Steve Eder and David Lawder, Editing by Chizu Nomiyama)

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