Top execs score big $$ as Fannie & Freddie swirl in the toilet
The BOHICA goodness that is Fannie Mae and Freddie Mac continues (more here, here and here). As these two giant turds swirl around a flushing financial toilet, their top executives are collecting big paychecks (story here from the NYT). Since the government (that means you, the taxpayer) took over these two FAILs in 2008, we have pumped almost $154B into this toilet with no end in sight. This is the epitome of government double down on FAIL.
Regulators have approved generous executive compensation at Fannie Mae and Freddie Mac, the taxpayer-backed mortgage finance giants, with little scrutiny or analysis, according to a report published Thursday by the inspector general of the Federal Housing Finance Agency.
The companies, whose fates are to be decided by Congress this year, paid a combined $17 million to their chief executives in 2009 and 2010, the two full years when Fannie Mae and Freddie Mac were wards of the state, the report found. The top six executives at the companies received $35.4 million over the two years. Since Fannie Mae and Freddie Mac were taken over in September 2008, the companies’ mounting mortgage losses have required a $153 billion infusion from taxpayers. Total losses may reach $363 billion through 2013, according to government estimates.
Charles E. Haldeman Jr., a former head of Putnam Investments, the giant fund management concern, joined Freddie Mac as its chief executive in 2009. He made $7.8 million for 2009 and 2010. Fannie Mae’s chief is Michael J. Williams, who has worked at the company since 1991. He received $9.3 million for the two years. Company officials declined to comment.
With hundreds of billions in government support necessary to keep the companies running, questions are arising about the nature of the pay packages and how performance goals are determined. The pay was approved by the housing finance agency, which is charged with conserving the assets of Fannie and Freddie on behalf of taxpayers.
Of course this is nothing new for Fannie & Freddie, which have been run like patronage mills for politically-connected plunderers. Using Enron accounting schemes, Clinton appointee Frank Raines skated away with over $90M in salary & “bonuses” after 5 years at Fannie. He and corruptocrat senator Chris Dodd also got sweetheart VIP loans from Countrywide pal Angelo Mozilo, who was recently fined $67.5M for securities fraud and insider trading violations.
The response from the FHFA (Federal Housing Finance Agency), government overseer of Fannie & Freddie, is not surprising. Apparently we need to pay big for quality management or the taxpayers will be harmed.
Edward J. DeMarco, acting director of the Federal Housing Finance Agency, testified before Congress on Thursday about proposals to overhaul Fannie and Freddie. “I am concerned that legislation to overhaul the compensation levels and programs in place today with the application of a federal pay system to nonfederal employees carries great risk for the conservatorships and hence the taxpayer,” he said.
Last year, Mr. DeMarco testified that the executive compensation plans at Fannie and Freddie were designed to achieve the goals of the conservatorship and “align executive decision-making with the long-term financial prospects of the enterprises, and minimize costs to the taxpayer.”
Because shares of both Fannie and Freddie have little value, the companies’ executive compensation consists solely of cash paid out in base salary, deferred salary and long-term incentive pay.
One thing that Mr. DeMarco is forgetting here is that since the government has taken over these two turds, these executives are government employees. So his argument about attracting top management geniuses to “minimize costs to the taxpayer” is fallacious.
Why not find a retired business person with a track record of saving failed companies to take over and do what really needs to be done with Fannie & Freddie – shut them down with a minimal loss to the taxpayers. Someone like Herman Cain would probably do the job for nothing. Actually I’d rather see Mr. Cain in the White House.