The stunning silence from the White House on GSE bonuses
posted at 12:10 pm on November 16, 2011 by Ed Morrissey
Barack Obama has exhorted supporters to object to large bonus payouts at financial institutions that took TARP bailout money. The House Oversight Committee and its chair, Rep. Darrell Issa, want to know why Obama hasn’t objected to the ridiculous levels of compensation at the two largest bailout recipients — Fannie Mae and Freddie Mac. In a new report (embedded below) titled “Government-Sponsored Moguls: Executive Compensation at Fannie Mae and Freddie Mac,” Issa and the Oversight Committee detail executive compensation at the two GSEs, who — unlike their private-sector counterparts who have either fully repaid or are in the process of repaying their bailout funds — still demand more bailout money from Congress. They also have a new ad pointing out the hypocrisy of Obama’s class-warfare rhetoric:
Oversight’s executive summary makes the point quickly and substantively:
When the bubble burst in 2007, Fannie and Freddie began to lose billions of dollars of investments in mortgage-backed securities (MBS) guarantees. In September 2008, the Federal Housing Finance Agency (FHFA) took Fannie and Freddie into conservatorship as a result of mounting losses stemming from the financial crisis.The Enterprises became de facto government entities, funded by preferred stock purchase agreements from the Department of the Treasury (Treasury). Today, the Enterprises remain a multi-billion-dollar drag on the federal government’s finances. Since they entered conservatorship, Treasury has provided $169 billion to Fannie and Freddie – and the payouts are scheduled to continue with no end in sight. According to recent FHFA projections, by the end of 2014, Treasury assistance to the Enterprises will total $220 billion to $311 billion.
Since the Enterprises have become government-funded entities, lavish payment packages have been doled out to their senior executives, and taxpayers have been footing the bill. In 2009and 2010, the Enterprises’ top six officers were given a total of more than $35 million in compensation. Of that amount, a total of $17 million in compensation was given to the CEOs of the Enterprises. Additional bonus installments for 2010 may still be forthcoming, and the two CEOs stand to make a total of $12 million in 2011. In addition, an executive has been awarded a substantial signing bonus – $1.7 million – upon joining the Fannie Mae. As these figures indicate, senior executives at Fannie Mae and Freddie Mac have become the highest compensated workers on the federal payroll – making as much as eight times more than the President of the United States. The executives even make more than their conservator, FHFA Acting Director Edward J. DeMarco.
Such lucrative compensation packages may be appropriate for profitable companies in the private sector, but substantial questions exist whether they are appropriate for entities in taxpayer-funded conservatorship, especially those that are bleeding billions of dollars each quarter. In this context, it is important to remember that taxpayers – not corporate shareholders – are footing the bill for these lavish bonuses.
Exactly. Shareholders can vote with their feet and their wallets in support or opposition of private-sector executive compensation packages. Taxpayers are given no choice with Fannie and Freddie. Now, which of the two should government officials be discussing — private-sector compensation, or GSE compensation funded by American taxpayers? And why does Obama rail about the former while completely ignoring the latter? It’s because he wants to keep Fannie and Freddie in place so that activist government officials can exploit both once again for their social-engineering purposes.
Oversight is holding hearings on these issues as this post goes live. We’ll keep an eye on the proceedings, and see whether Democrats outraged over bonuses in banks have any concern about taxpayer dollars going to Fannie and Freddie bonuses.