Lawmakers aim to block bonus pay at Fannie and Freddie

Lawmakers aim to block bonus pay at Fannie and Freddie

www.cnn.com

(CNN) -- Lawmakers are trying to block million-dollar bonuses to top executives at Fannie Mae and Freddie Mac, the mortgage-backing firms that required a giant taxpayer bailout.

(visit the link for the full news article)

My first thread. I hope it's done correctly.
I didn't see this in a search. If it is not "breaking" enough. Mods please move.

I really hope this is a sign of more accountability strengthening in our system. Why this was ignored for this long is insanity. The market needs to liquidate to correct these over priced homes. Let's hope the same mistake with these bailouts is not repeated or this turning into a bigger power grab attempt.


www.cnn.com
(visit the link for the full news article)

reply to post by Corruptedstructure


I think you're right that an attempt to punish those in charge at Fannie and Freddie may be a sign of stronger measures for accountability. But now the question is "Will the sytem accept it, or will the system evade accountability?"

My own belief is that the people elected to office make a difference, but that seems to be a minority opinion on ATS. There are many who say there is no two party system, they're all the same, TPTB control everything. I disagree. I think accountability is possible.

The housing market needs to be examined and corrected, so too, do many other aspects of government; Justice Department, Green industry loans and subsidies, foreign policy, and on and on.

Well, welcome to authoring threads. Don't let the crazies get you down.

reply to post by charles1952


Thanks for the positive response.
I believe the current power system is in for a "rude awakening". I just hope the outcome doesn't have to be by going through unnecessary destruction.
I am interested in purchasing my first home soon. I'm not going to let this economy kill that goal in my life.

I'm beyond caring about people that try to tear others down. I just use it as fuel. So..bring on what you call "crazies"!

I'm torn on this, honestly.

I am no fan of Fannie and Freddie. It was a bad idea and a bad implementation to begin with, and never should have been done.

Fannie Mae and Freddie Mac are private enterprises that are government sponsored. The way they are set up, the government sponsored status of their enterprise virtually insures the value of the stock to investors. This undermines the concept of stock ownership and accountability to stock holders (they invest because it is almost identical to a government bond because the government insures the value of the stock to the investors - failure of the business does not necessarily mean a failure of the stock).

So, I'm against Fannie Mae and Freddie Mac's existence.

However - they are a privately owned and operated company, and it would seem that their status as being government sponsored does not, currently, open them up to micro-management by congress.

I am leery of the precedent that could be established for government to come in and tinker with the internal function of private businesses.

I think the ultimate solution is to eliminate Fannie and Freddie as GSEs (they can still exist as private institutions - but they will fail if they continue the way they have been, since their stock will lose all backing of the printing press). Attempting to block bonuses to upper level management of the company seems like it's trying to change a fan belt without shutting off the engine.

reply to post by Aim64C


It's easy to agree with you (so I will). But I do have a couple of comments.

You mentioned being concerned about the precedent being set by the government interfering in private business. As you point out, they are unusual private businesses and might not set any precedent. Regardless, I think the precedent has already been set, most famously in the auto industry.

No, I don't want to stick my hand in that engine to make repairs, but it may be that that is the only option that might pass now, and they have to work up to serious reform. This proposal may be the start of a good precedent.

I support the decision only because FF is government sponsored and because bonuses are getting out of hand in this economic climate. Capitalism is self-destructing due to unregulated greed and the too big to fail mentality upheld by our government.

I would have immensely preferred that a)FF go out on its own or b)nationalised. Government sponsoring private business is lame and incompatible for the general public. Too many conflict of interests, much like congress involved in the insider trading scandal that is about to burst before everyone's eyes.

In capitalism you either make it out on your own OR YOU FAIL! If I open up a convience store and fail I do not expect anyone to help me. Why should it be different with AIG, GM, FF, etc? In socialist countries they do NOT bail out private companies, they bail out public enterprise where every citizen owns a share. In america they bail out wall street investors which is criminal imho...........

reply to post by charles1952

My own belief is that the people elected to office make a difference, but that seems to be a minority opinion on ATS. There are many who say there is no two party system, they're all the same, TPTB control everything. I disagree. I think accountability is possible.

I think you've either got your head in the sand or you are a shill. (They're obviously not paying you guys enough if this is the best you can do. )

Don't let the crazies get you down.

You mean stick to the *reliable, unbiased* MSM & keep drinking the cool aid? Right on.

As for lawmakers "trying to block million-dollar bonuses to top executives at Fannie Mae and Freddie Mac" — the horse already bolted, left town, and was last seen relaxing in the vicinity of a Swiss bank, champagne bucket tied to its head.

I think that any company that accepts that kind of money from the gov't deserves to lose some of their independance as far as their decision making!!

the alternative would be to not give the companies any more money..something which isn't a bad idea!! and rings better with the basic belief system of the US.
want "free markets""?? well, then don't allow any more "bailouts" and corporate welfare....
dependency equals servitude, and there's some companies out there that wouldn't be in existence if it wasn't for their dependence on the taxpayer money!!! same goes for the people really....
both types of welfare puts the companies in people into a position where they hoops laid out by the gov't that they have to jump through to get the help they need to survive. that is not freedom, is contrary to the "american way".

and, I don't think you can separate things...say that it's okay for the gov't to start dictating to fannie and freddie, without later having to explain why you shouldn't have the same right to dictate other companies and people....

it's time to give the american people and companies a chance at gaining their independence back!! No More Bailouts!!!!

reply to post by Corruptedstructure

Yes I think you did a fine job on your first thread! congratulations!

Regarding the topic, I agree that Fannie and Freddie are unusual institutions.

Perhaps the failure of legislators was to not stipulate that some tinkering may be a requisite requirement for providing the bailout money. For example they could have included a clause that simply said something to the effect that bonus payouts must be tied to the performance of the company. This has been the case for my bonuses, so I don't think it's an unreasonable stipulation.

If the companies are performing poorly and huge bonuses are being paid out, a careful examination of the plan that results in bonus payouts should be undertaken. If the plan results in large payments for poor performance, that doesn't even make sense to me, but reports I've read seem to indicate that's the case. I'm not familiar with the details of their bonus plans, so I can't really comment on those details, but I think they at least bear a careful review.

reply to post by charles1952

You mentioned being concerned about the precedent being set by the government interfering in private business. As you point out, they are unusual private businesses and might not set any precedent. Regardless, I think the precedent has already been set, most famously in the auto industry.

True - but it doesn't mean I'm excited about perpetuating it.

They are a government sponsored business - but if it's not in the workings for Congress to come along and block bonus payment.... you even get into ex-post-facto concepts. If the decision has already been made to pay the bonuses... can Congress come along and grant itself the authority to over-ride a decision that has already been made?

To draw a sort of parallel - if I go on deployment with the military and return to fill out my travel claim. I fill it out and in that time, changes are made to the allowed BAH. I still get paid the BAH that was in effect for the dates I was deployed - even though I will be paid when the BAH has been adjusted to be something else.

It may not be a perfect example - but it illustrates the concept of what I'm talking about with trying to block a bonus payment.

Now - blocking future bonuses, sure. . . but I'm not sure how all of the inner workings of this one are.

I just think it's a far more productive use of time and energy to get rid of government sponsoring of enterprises (GSEs). It's a very bad concept.

No, I don't want to stick my hand in that engine to make repairs, but it may be that that is the only option that might pass now, and they have to work up to serious reform. This proposal may be the start of a good precedent.

I suppose that was kind of a poor analogy.

Like trying to fix a broken faucet without turning off the water; or trying to put out a fire without shutting off the gas line.

The problem isn't CEOs getting bonuses. The problem is GSEs, in general. By time you bring them under enough regulation for government to be able to "keep them in line" - they become just another agency of the government (that is, interestingly enough, just as out of control as the rest of government).

The only solution that makes sense is just to cut it loose from the printing press and let it survive or fail on its own merits.

Congress doesn't want to do this, however - as GSEs effectively allow them to fund programs (the FHA's policies would have cost us trillions of dollars) without it being an official part of the budget. The catch is that the stock of GSEs is backed by the federal government as though it were a bond - so the tax payer is faced with the concept of 'sleeping debts' that can suddenly crop up.

Even though Bush and many Republicans have criticized Fannie and Freddie over the years - they have never pushed very hard to get rid of it... Bush often like to comment on how housing rates were at their highest under his administration - and this would not have happened were it not for Fannie and Freddie being GSEs and their stock being valued the same as a government bond (because, essentially, it is).

And that is why it is going to be very difficult to get Congress to do what needs to be done.

The problem in this country is that we have become accustomed to taking everything to the National level of government, rather than keeping it at the States (where it is supposed to be). Which is why our National level of government is so starved for resources (it is trying to do everything) - and why it is destroying our economy (because the National level can print money - something States can't do, and part of the reason why they were supposed to be handling most of the tasks of governing - along with different philosophies regarding government function and responsibilities).

reply to post by Aim64C


It is basically state capitalism, where private business and government work together as though there are no conflicting interests. When they fail the tax payers bail out wall street and then it is rinse and repeat till we can't raise our debt ceiling anymore and the whole economy collapses.

if we are going to have capitalism then let government and business each play their role.

if we are going to have socialism then go ahead and start nationalising everything in full and let government run the operations in full.

This middle-road solution only aggrivates problems!

reply to post by Aim64C


I honestly do not think that anything with the label "Federal" should be in the insurance business period.
Seems to lead to unequal regulatory practices and reckless behavior.

Fannie and Freddie are the forever fall guys. Shame.

Adversely impacting the programs that house people is not a move towards accountability.

It does not address the traders that steal money trading debt risk.

Eliminating the laws that force corporations to return record earnings, each quarter, to the shareholders would be a good start.

Genocide occurs because the law states that corporations have to make solid returns for their investors.

Keep in mind that the majority of a corporations stocks are typically owned by the board and the founders.

The knights of the round table are the board of directors in the new millennium grail tales.

Peace

pause4thought,

Thank you, thank you, thank you. I've only been called a shill once before, (I can't remember if it was for Israel, Monsanto, or the legal profession) and I'll treasure this for years. But, no, I'm not a shill, just ignorant. See my signature.


Aim64C,

What a great post. I'm sorry I can't award more than one star. You're very generous with your time and I appreciate it immensely.

reply to post by Aim64C

However - they are a privately owned and operated company

Erm .. they were Government Sponsored Enterprises .. now they are simply Government Corporations. The US Government, with each bailout, took a portion of ownership as collateral .. the US Government owns roughly 80% of the companies .. they are no longer "Private" they have been nationalized. We can do what ever we want to them now.

Good. This is exactly what needs to be done. Because these companies are NOT going to police themselves or show any restraint. That has been made quite clear by the fact that they spent years not policing themselves or showing any damn restraint.

Originally posted by charles1952

I think you're right that an attempt to punish those in charge at Fannie and Freddie may be a sign of stronger measures for accountability. But now the question is "Will the sytem accept it, or will the system evade accountability?"

I dont mind some assistance to companies, especially when times are tough. However there needs to be a limit on that assistance. The free market is designed to take care of companies who under perform, which is to say the company either makes changes to bcome profitable and survive, or they go under from poor leadership / management.


The bail outs must end. If people insist on the bail outs, then I prefer to see that assistance go to homeowners and other people who were screwed over by some of the to big to fail businesses.

@ the OP -
Nice job on your first thread.

Originally posted by charles1952
reply to post by Corruptedstructure

 

I think you're right that an attempt to punish those in charge at Fannie and Freddie may be a sign of stronger measures for accountability. But now the question is "Will the sytem accept it, or will the system evade accountability?"

My own belief is that the people elected to office make a difference, but that seems to be a minority opinion on ATS. There are many who say there is no two party system, they're all the same, TPTB control everything. I disagree. I think accountability is possible.

The housing market needs to be examined and corrected, so too, do many other aspects of government; Justice Department, Green industry loans and subsidies, foreign policy, and on and on.

Well, welcome to authoring threads. Don't let the crazies get you down.

You keep dinking that KOOLAID! Are you serious? Come on, REALLY????? You believe that the those who are "SUPPOSEDLY" elected make a difference? WOW! I thought we were making headway with "we the people". Accountablity is possible????? WHO, WHEN and WHERE, has any of these Buffoons ever taken accountablility....just "3" examples, PLEASE....I must know!

They're privately owned and operated, but since they're backed, and heavily funded these days, by the U.S. government, I think that the government has every right to have a say in them getting bonuses. Fannie and Freddy are still getting bailouts left and right from my understanding, and when you're doing so poorly that you need to be using tax money, you don't deserve bonuses.

My bottom line: If the government is intervening in their earnings, the government has a right to stipulate certain things on how those earnings are doled out.