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The Spectacle Blog
On Tuesday, the House Financial Services Committee passed, by a 52-4 margin, a bill designed “to stop future bonuses at Fannie Mae and Freddie Mac and suspend the current multi-million dollar compensation packages for the top executives.”
The rest of the Committee’s press release on the bill:
Earlier this month, the Federal Housing Finance Agency announced the CEO of Fannie Mae received $5.6 million in compensation and the CEO of Freddie Mac received $5.4 million. Under the bill, the top executives of Fannie and Freddie could only have earned $218,978 this year.
H.R. 1221, the Equity in Government Compensation Act, ensures that executives and employees of Fannie Mae and Freddie Mac will receive compensation that is in line with pay practices at federal financial regulatory agencies. The bill does not make them Federal employees, but it aligns their compensation with that of Federal employees.
“The taxpayer-funded bailout of Fannie Mae and Freddie Mac is the biggest bailout in history. Adding insult to injury, the top executives of these failed companies receive multi-million dollar pay packages, all courtesy of American taxpayers who are having a difficult time making ends meet these days. These lavish compensation packages and bonuses are unfair, unreasonable and unjust to the taxpayers whose assistance is the only thing keeping Fannie and Freddie afloat,” said Chairman Bachus.
Since their bailout Fannie and Freddie have received $170 billion in taxpayer dollars. While the GSEs have continued to report losses and receive additional bailout money, the executives of the companies have received millions in compensation and bonuses. On Christmas Eve 2009, Treasury and FHFA ratified $42 million worth of Wall Street-style pay packages for the GSEs’ 12 top executives. In 2010, FHFA approved similar pay packages. According to its SEC 10-K filings, Fannie Mae paid its top six executives $15.4 million in salaries and bonuses. Fannie Mae CEO Michael Williams earned $5.6 million. Freddie Mac paid its top five executives nearly $18.5 million. Freddie Mac CEO Charles E. Haldeman, Jr. was paid $5.4 million. Earlier this month it was revealed that Fannie and Freddie would award $12.8 million in bonuses to the top executives.
“Today the Committee approved a bill to stop rewarding the executives of these bailed out companies. Never again should Americans be forced to send their hard earned tax dollars to be wasted on multi-million dollar pay packages for Fannie and Freddie executives,” said Chairman Bachus.
And who wouldn’t be angry at these organizations having incinerated more than a hundred billion dollars of taxpayer money in a quest to fulfill politicians’ mandates to increase home ownership regardless of whether new owners could actually afford those homes?
But if you were a talented financial manager (and I have no opinion of the talent level of current GSE management), would you likely work at a place which paid you no more than a senior manager in any division of government? People have a handful of prime earning years in their lives. We have a responsibility to our families to earn what we can. This is, of course, not the only factor which would go into a decision about where to work. Everything from job enjoyment to patriotism could fit into someone’s willingness or desire to try to clean up the mess made by politicians from Jimmy Carter to Barney Frank to George W Bush.
But just because the companies have failed does not mean the current executives have failed. And with so many billions of taxpayer dollars at stake, don’t we want to incentivize the best possible care-taking of our money by those entrusted to clean up the mess?
What I would propose, rather than telling these people that they will never be able to earn a decent living trying to save billions of taxpayer dollars, is an incentive program by which a third party analyst group projects expected results from the GSEs and where executives at the GSEs can be financially rewarded for beating those results. Perhaps a bonus pool could be created equal to some fractional percentage of the savings of taxpayer dollars, with the pool capped at some dollar amount.
There is little doubt that current multi-million dollar bonuses for executives of Fannie Mae and Freddie Mac appear inappropriate, and the politics of opposing them makes for easy populist soundbites. But to go to the other extreme and make it impossible for someone who can earn seven figures in the private sector only to be able to earn $100,000 or even $200,000 at a GSE is penny-wise and pound-foolish.
View all comments (31) | Leave a comment
More Blog Posts by Ross Kaminsky
http://spectator.org/blog/2011/11/16/tough-call-on-fannie-freddie-b
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Bob| 11.16.11 @ 3:02PM
You GOPukers simply amaze me. You are f******* hypocrites to the nthhhh degree. Your current bum of the month club frontrunner Newt the Puke Gingrich took millions in bonus money from Freddy Mac. Did he use this ill gotten gain to pay off his wife's Tiffany debt? A full Congressional and FBI investigation is in order here. Otherwise your hypocrisy leaves me speechless.
Conservative Bob| 11.16.11 @ 3:28PM
Couple of points worth noting, not a single vote has been cast. Until people actually begin to vote in primaries who is and is not leading is an exercise in wishful thinking by the pundant class and has little if any meaning.
How about we agree that all internal government lobbing efforts, that is government agencies hiring former elected officials to lobby their former colleges to influence legislation, should end immediately. This is an unholy alliance that is as putrid as Government Employee Unions and is not in the interest of the republic, the tax payers or good governance.
The Knife| 11.16.11 @ 5:39PM
Bob, you know a lot about hypocrisy. As an Obama supporter you are practically an expert. We will take your concerns under advisement. The Obama administration is waiting for your input concerning corporate shakedowns and payoffs to money bundlers and criminal labor unions. You could make quite a difference with your party of choice. Even old fascists like yourself should have a code of ethics. We will look for the effects on the Democratic Party. Nobody should hold their breath.
Jack in Wi| 11.16.11 @ 5:39PM
Gingrich, the elites bum for November, is now toast. His 1.8 million bailout from Fannie Mae is now out in the open. I prediccted the the end of Cain and I predicted the rise and fall of Gingrich weeks ago. It was obvious to anyone who can think straight that the the base of the Republican Party is being played like a fiddle. The only 2 viable candidates with the money and supporters to win the nomination and election are Ron Paul and Willard Romney. Lets have civil, long and honest debates between both of them and see if this party can be re united.
Conservative Bob| 11.16.11 @ 3:12PM
The GSE and near GSEs are all failed institutions. USPS, Fannie, Freddie, Amtrak, GM, Chrysler et al. How about we end the GSEs and then as private companies they and their stock holders can determine what is and is not a reasonable salary and bonus structure.
When we as tax payers have to deliver truckloads of tax payer funds to keep an entity afloat then we have the right to determine the compensation package by default. I agree with some form of bonus structure tied to operating performance, but the package would have a significant caveat if you need additional tax dollars then you salary automatically drops to the comparable GS level. These institutions are still not serving tax payer interest and continue to screw up the housing market.
PCC| 11.16.11 @ 4:19PM
If you pay peanuts, then you'll get monkeys.
Having said that, cap the total annual pay at, say, $1 million. You can get a lot of talent for that amount.
albert constantine jr.| 11.16.11 @ 4:27PM
I think an important question would be why do we pay executives bonuses. If it is to encourage productivity, in its absence (such as continuing losses) are bonuses merited? Based on the performance of FANNIE MAE and FREDDIE MAC, I'd say certainly not. I'm not sure that low paid employees could screw them up worse.
Bill Hussein O'Stalin| 11.16.11 @ 4:29PM
This isn't even close to an organization that should be paying bonuses since there is no risk.
The risk is all the taxpayer's. Where is their bonus?
They are simply told to bend over and take it while connected politicians take home millions.
The entire institution should be investigated by a grand jury.
By the way, in addition to the bonuses the taxpayers are paying legal fees for scamsters like Franklin Raines. The average citizen would be outraged to discover that legal fees defending these thieves, and that's all they were, is around 160 million dollars.
Good Grief, Ross, you're a trader but you're no journalist.
http://www.nytimes.com/2011/01.....wanted=all
Since the government took over Fannie Mae and Freddie Mac , taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in civil lawsuits accusing them of fraud. The cost was a closely guarded secret until last week, when the companies and their regulator produced an accounting at the request of Congress.
Where the Money Has Gone
The bulk of those expenditures — $132 million — went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted. The legal payments show no sign of abating.
Jack in Wi| 11.16.11 @ 5:45PM
Mr. O' Stalin. That was great reporting on Newt's 1.8 million dollar bailout from Fannie Mae this morning.I salute your fine work.
Chuck| 11.16.11 @ 4:43PM
Unfortunately Bob is correct, Gingrich feeding from the federal trough just like any liberal is indefensible and almost as bad as Romneycare which is also indefensible. The Republican Party has a serious problem when their current frontrunners have issues like this equivalent to the proverbial sword of Damocles dangling over their heads.
Bay Stater| 11.16.11 @ 4:54PM
Newt's Freddy Mac bonus effectively ends his presidential campaign. Trying to explain this is a joke of the first order. Well he had his 15 minutes of campaign fame and now the end. Sorry Callista no jewel bespectacled inaugural gown.
Herb Tarlek| 11.16.11 @ 5:06PM
Stuff like this is exhibit A as to why the time of the Republicrat duopoly is coming to a close.
Jeff Perren| 11.16.11 @ 5:19PM
I have to respectfully disagree with this plan.
The only moral solution is to untie the knot between Fannie Mae/Freddie Mac and government. Then, what bonuses the executives receive will be a strictly private affair of no public policy import.
How to do that can take several different forms, of course.
Derek Leaberry| 11.16.11 @ 5:23PM
Taxpayers have been fleeced by crooks once again. Roberspierre, where for art though?
Sean| 11.16.11 @ 5:31PM
I am a historian can I get paid over a million dollars by Fannie or Freddie . I will work for less than what they are paying Newt.
Jack in Wi| 11.16.11 @ 5:42PM
Sean: I have degree in history and want a fat bailout just like Newt too.
JeffC| 11.17.11 @ 11:09AM
paid Newt ... and they paid him alot less than they paid the mayor of Chicago, that financial genius ...
Trinacria| 11.16.11 @ 6:36PM
With all due respect, Ross, I think you're coming at this from the wrong angle. When faced with the dilemna of paying bonuses to executives at companies that receive taxpayer funding, the central question shouldn't be whether or not the bonuses are appropriate; the question should be whether or not taxpayer support is appropriate. Remove taxpayer support, let the companies succeed or fail on their own, and allow the shareholders to address the issue of executive compensation. Problem solved.
Dai Alanye | 11.16.11 @ 6:39PM
Despite the fact we are broke - our credit cards loaded, our bank accounts at zip, the utilities threatening to turn off our services - my wife pointed out that we are both high-caliber individuals, fully deserving of all the luxuries we allow ourselves. You wouldn't want low-skill, low-paid parents running this family, would you, kids?
Rest assured, if the Fanny and Freddie execs were stockholders in a private corporation, not a one of them would want the assets wasted on bonuses under these circumstances. Kaminsky has some serious blind spots, I'm afraid.
sjccoach| 11.16.11 @ 10:10PM
This is not a tough call Mr. Kaminsky. Fannie and Freddie should not exist. You establishment CINOs are the problem. We have a spending problem. This is a good first step in cutting spending. If the employees can do better in the private sector let them go.
aware| 11.17.11 @ 5:51AM
Anything to keep the party going, huh Ross. After all, the housing market hasn't been totally destroyed yet. Crony capitalism of housing, hypocrite.
L. Ross| 11.17.11 @ 8:02AM
I find it interesting that we have such high quality leadership in the military (Colin Powell, David Petraeus, Stanley McChrystal, etc.) who all work for about the base pay of the Fannie/Freddy CEOs. Admittedly, they are not based in the financial world, but they have demonstrated leadership ability and can handle large organizations on a tight budget. Why do we assume that the only decent leadership for these rapidly sinking ships must come from the same cesspool that generated the current problem in the first place?
JeffC| 11.17.11 @ 11:08AM
Exactly right. Fannie and Freddie are not risk taking financial experprises. Anyone that thinks it takes the same skills to run Fannie and Freddie as it takes to run a hedge fund doesn't understand what they actually do for a living.
martin j smith| 11.17.11 @ 8:03AM
Lets Occupy Fannie and Freddie why don't we ?
Pecos Pete| 11.17.11 @ 8:11AM
Ross, there are lots of highly competent people who would and could manage Fannie for a LOT less than the money paid to the current bag of losers. A compliant board of directors supported by a set of "comparative" salary charts does not mean that anyone should earn excessive salaries, benefits, parachutes and bonuses. I've lived through three CEO changes and couldn't tell when one departed and the other arrived. Yet, they were all paid excessively.
Wayne| 11.17.11 @ 9:17AM
Its not a tough call at all. Get out of the mortgage business, let Fannie and Freddie go, and let them compete like any other business or go bankrupt.
Quasi-government agency do not work. And the talent pool argument is pure nonsense. The type a Romney may make.
JeffC| 11.17.11 @ 11:05AM
Does anyone even know what these excutives do for a living ? Does anyone even try to understand the value they bring to their businesses ?
The only reason anyone should be paid a huge salary/bonus is because they have skills and ideas that promise to bring in huge profits. In other words they are risk takers with the skills to pick winning bets.
The managers of Fannie and Freddie are not supposed to be risk takers, they are supposed to be caretakers. Caretakers don't need to be paid huge numbers.
This idea that we need the "best and brightest" at Fannie and Freddie is pure BS. Fannie and Freddie are not risk taking operations and thus do not need to pay out risk taking salaries/bonuses to their managers.
Indy| 11.17.11 @ 12:12PM
So why doesn't POTUS ask Mr. Warren Buffet (who says he wants his taxes raised) to be CEO of Freddie or Fannie and work for $1...for the good of our country?
It is easy to sit on the sideline and go on any TV station to spew your political positions when you are a Warren Buffet, why not step to the plate and serve in an area where he has financial expertise and does not need the money...that would be a way to lead by example.
Tish | 11.17.11 @ 12:37PM
Fannie and Freddie have long been known as the place where Democrats go to amass a fortune. It's a joke to think that any of the executives have actually earned more than a fraction of their compensation.
Marc Jeric| 11.17.11 @ 3:56PM
"Community Reinvestment Act" - to facilitate house buying by "underserved minorities"; this communist law started under that bloviating gasbag Carter, was reinforced by that disbarred felon Clinton, and was pushed down our throats by the Pelosi-Reid majorities and threats of fines and jail by Frank and Dodd; Bleating about "ownership society" by the wimp Bush did not help. ACORN Housing Corporation was instrumental in "qualifying" minority buyers by their welfare checks, SSI checks, food stamp value, apartment subsidy values, unemployment checks...Normal banks tried to save themselves by bundling 90 normal mortgages with 10 of these faked ones, and then passed the packages to Fannie and Freddie.
This revolution was more effective that the Lenin's October 1917 one in bringing our commies and eco-nazis to power under Mulah Obama.
Rich Rostrom| 11.18.11 @ 12:54AM
A few years ago there was a faux scandal about bonues paid to executives at AIG after AIG had received federal assistance.
In fact, the bonuses were being paid to financial specialists who were working 60-70 hour weeks untangling and resolving AIG's failed CDSs and such.
These people had come on board for base salaries well below what they normally got, with the promise of bonuses down the road if the mess was effectively resolved.
I agree that Fannie and Freddie should lose GSE status - but that can't be done instantly without collateral damage.
Before excoriating the present management at Fannie and Freddie, I want to know when they took over, and what they have done while in charge. Are they moving to achieve that termination of GSE-ness? Or to exploit it further?
That the losses continue is bad, but if the losses have been substantially reduced below expectations, that's a huge improvement and deserves a reward.