Free Markets, Free People

Freddie Mac and Fannie Mae execs bonus pay–seriously?

While the administration regularly takes Wall Street to task for what it calls excessive bonuses, especially to companies bailed out by taxpayer money, it has been relatively silent about the bonuses approved by its own Federal Housing Finance Agency for two quasi-government companies at the center of the housing market meltdown:

The Federal Housing Finance Agency, the government regulator for Fannie and Freddie, approved $12.79 million in bonus pay after 10 executives from the two government-sponsored corporations last year met modest performance targets tied to modifying mortgages in jeopardy of foreclosure.

Remember AIG and the huge uproar over the bonuses they were contractually bound to pay soon after the bailout?  Well these bonuses weren’t wrapped up in any contractual binding.  These have been approved since that time.  And to top it off, on average, they’re larger bonuses than AIG paid.

You’d think the FHFA would have a clue, wouldn’t you?  You’d think they’d understand the “optics” of this sort of a payout of taxpayer money, not to mention that the government is supposedly trying to cut spending.

But obviously they don’t understand that.  

Thankfully the Congress has thus far reacted to the situation in a swift and positive manner (for once):

The House Financial Services Committee, responding to lawmaker anger over compensation at Fannie Mae and Freddie Mac, approved a measure that would suspend the compensation packages for executive officers at the companies. The bill also would require employees of the two firms to be moved onto a pay scale that lines up with federal financial regulators including the Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency.

“Awarding lavish pay packages to the heads of these companies that have accepted $170 billion in taxpayer cash can’t be defended,” Representative Spencer Bachus of Alabama, the panel’s chairman and sponsor of the bill, said today.

We will see if they carry it on through and actually get something passed, but even Barney Frank, who initially opposed the bill is now supporting it.  And when Freddie and Fannie have lost Barney, they’re in trouble:

Representative Barney Frank, the top Democrat on the Republican-controlled panel who initially opposed the measure, voted for the bill because of what he described as “insensitivity” by the companies in continuing to award bonuses.

“I had hoped that they would use restraint on their own because I think it’s better that we not intervene,” Frank, of Massachusetts, said today. “But they did not.”

Again, the “insensitivity” wasn’t something the companies did, although they likely requested the bonuses.  It was the FHFA, a governmental agency, which approved the bonuses.  It is business as usual among the bureaucrats who are obviously “insensitive” to the situation and continue to lavish taxpayers money where ever they decide it is deserved.  If you want a clue as to why the federal government’s spending remains out of control, this is a good example.

Bureaucracies are forever it seems and they become the unaccountable drivers of government action.  It is there which, if any meaningful reform is ever to be undertaken with shrinking the size and cost of government is to be done, where reformers must start.


Twitter: @McQandO

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10 Responses to Freddie Mac and Fannie Mae execs bonus pay–seriously?

  • Fannie Mae and Freddie Mac have become an embarrassment, after first becoming a complete failure.

    • @Neo_ Nobody except political junkies on the right know anything about this. The media has very carefully shushed up this kind of news back to page 13, and OWS brought focus back to banks….

      • @Harun @Neo_ Hell, the media did an awesome job of covering up that someone took two shots at the White House, LAST WEEK.

        Let’s all have a laugh and imagine that happening if Tea Partiers had a camp on the Washington Mall and the guy was named Joseph Jones and he was from Alabama and he voted Republican.

        I know the media has been jumping small shark tanks for a long time, but this was a whale shark doozy. Why should I be surprised that they are giving more play to a guy getting hit in the head with a frozen turkey than they are the Freddie Fannie show, or the White House shooting?

  • If you tax (punish) what you want less of, reward what you want more of, then what is the message being sent here?

    Øbummer is getting what he desires, a failed state.

  • The sound of tooth-sucking from the Obami is deafening…
    Echoed by the Mushroom Media, of course.

    You can’t seriously expect the Collective to end a practice that has so WONDERFULLY managed to pump graft into the pockets of their faithful. Really…!?!?!?

  • It’s sort of a tradition to loot the treasury you were supposed to be guarding just before the city falls. That’s all this is.

  • I heard some conservative talking heads say they see no problem with this because you need to pay well to attract the best people but I never bought into that.

    In the case of top executives I see very little correlation between pay and results. Some of the worst run companies pay off the biggest bonuses.

    The reason is that Boards of Directors are incestuous groups of wealthy people, often former CEO’s, who serve on multiple boards. They do a poor job of taking care of their fiduciary responsibility to the stock owners.

    Honestly, if losing money is ok you don’t need to pay someone millions for that. You could get an MBA straight out of college and pay them a hundred grand to lose your money for you.