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The Obama administration plans to significantly cut the pay of executives at the seven companies that have received the most bailout money, reacting to a growing outcry about huge new bonuses and other compensation at firms propped up by taxpayer dollars, according to people familiar with the decision.

The 25 highest-paid executives at the companies would have their salaries and cash bonuses cut by an average of about 90 percent from what they received last year, according to the people. Some of the lost cash pay, however, would be replaced by grants of stock that the executives would have to hold for a set period of time.

On average, the overall compensation of the affected executives would be cut in half. They also would be required to obtain the government's permission for any future perks worth more than $25,000, such as company cars or use of private planes.

The move is the most dramatic step yet by the Obama administration to curtail huge Wall Street pay packages that have sparked outrage by many Americans, although compensation experts said it would have little real impact because it affects so few companies.

But the action could have symbolic value. As financial firms have begun recovering from the financial crisis, large bonuses and other pay for executives at companies that received bailouts have become the target of many in Washington. Treasury Secretary Timothy Geithner and top White House adviser David Axelrod this week both called the compensation "offensive."

The plan developed by Kenneth Feinberg, the Treasury Department's special master for executive compensation under the $700 billion Troubled Asset Relief Program, applies to the seven companies that have received "exceptional" government assistance -- tens of billions of dollars each.

The companies affected are American International Group, Citigroup, Bank of America, General Motors and Chrysler, as well as the automakers' financing arms, GMAC and Chrysler Financial. Those companies have received about $240 billion of TARP money and have repaid $2 billion so far.

The new pay rules could backfire by prompting some executives to leave the companies, said J.W. Verret, a scholar at the Mercatus Center policy research institute at George Mason University.

"This new policy will attract executives who don't have a better alternative, and who don't mind running a business based on political influence," he said. "This new policy will save us tens of millions at a cost of billions in losses when we try to sell these companies."

Nell Minow, editor at research firm Corporate Library, said administration proposals to mandate non-binding say-on-pay votes by shareholders and more independence for corporate compensation committees would have a greater effect on compensation. But, she added, "When you're talking about restoring credibility and a sense of fairness, I think there is a tremendous symbolic effect that's legitimate and worthwhile."

GM spokesman Tom Wilkinson said the firm was in discussions with Feinberg's office regarding executive compensation.

In a strange twist to an already complicated legal situation, artist Shepard Fairey admitted today to legal wrongdoing in his ongoing battle with the Associated Press.

Fairey said in a statement issued late Friday that he knowingly submitted false images and deleted others in the legal proceedings, in an attempt to conceal the fact that the AP had correctly identified the photo that Fairey had used as a reference for his "Hope" poster of then-Sen. Barack Obama.

"Throughout the case, there has been a question as to which Mannie Garcia photo I used as a reference to design the HOPE image," Fairey said. "The AP claimed it was one photo, and I claimed it was another."

New filings to the court, he said, "state for the record that the AP is correct about which photo I used...and that I was mistaken. While I initially believed that the photo I referenced was a different one, I discovered early on in the case that I was wrong. In an attempt to conceal my mistake I submitted false images and deleted other images."

In February, the AP claimed that Fairey violated copyright laws when he used one of their images as the basis for the poster. In response, the artist filed a lawsuit against the AP, claiming that he was protected under fair use. Fairey also claimed that he used a different photo as the inspiration for his poster.

After Fairey's admission, a spokesman for the Associated Press issued a statement saying that Fairey "sued the AP under false pretenses by lying about which AP photograph he used."

Fairey said that his lawyers have taken the steps to amend his court pleadings to reflect the fact that "the AP is correct about which photo I used as a reference and that I was mistaken."

The artist expressed his remorse in his statement, saying that he is taking "full responsibility for my actions which were mine alone. I am taking every step to correct the information and I regret I did not come forward sooner. "

He added: "I am very sorry to have hurt and disappointed colleagues, friends, and family who have supported me in this difficult case and trying time in my life."

Fairey's statement said he regretted that his actions would distract from the issue of fair use for artists. "Regardless of which of the two images was used, the fair use issue should be the same," he said.