There are definitely all sorts of problematic incentive structures all over the place. And they're definitely a problem. I think that just goes to show they're inevitable to a degree, that they're survivable & that free markets are not a silver bullet. These bailouts are certainly a push in the wrong direction, but unless I'm missing something, they're a very minor push. As you say, options as incentive are worse.

Compared to the other effects, that doesn't even show up on any kind of radar. For one thing, these companies are now essentially nationalised. Just the implications in terms of international politics & rhetoric are pretty big.

What did nationalisation do to the incentives of shareholders of other too-big-to-fail companies? What did it do the the execs. From the 1 year ago perspective this is still failure. 'This stock might lose 100% of it's worth' & 'this stock might lose 93%' look very similar when you are sitting on 100%. If any kind of serious distortion happens it probably happens near the bottom when things are pretty chaotic anyway. Executive compensation might be causing distortions, but the US' new found nationalisation policy has nothing to do with that.