This bonus information is really disturbing. Yes, of course I’m talking about the bonuses going to Fannie Mae and Freddie Mac executives. What did you think I meant?
Senior and Executive Vice Presidents at the two organizations will get retention bonuses, most of which have nothing to do with performance. Fannie Mae executives will receive bonuses between $470,000 and $611,000. Freddie Mac has not yet released the exact amounts, or even a range, for their anticipated bonuses.
The Freddie Mac plan pays bonuses in four installments with only the final payment having anything to do with performance. The government has invested more taxpayer dollars into the two mortgage-backers than it has into AIG. Last year, the two institutions lost about $108 billion.
Unlike AIG, where the CEO has asked bonus recipients to return at least half of their bonuses, there is no such compromise at Fannie Mae. (remember that Fannie Mae and Freddie Mac have made large political contributions in recent years, and even our president was one of the top three benefactors while in the Senate)
The CEO of Fannie Mae, Herb Allison, said in a company-wide email today, that eliminating the bonuses ‘would jeopardize our ability to fulfill the mission the government has given us to address the housing crisis.’
The AIG bailout – why?
The U.S. government has provided insurer AIG with more than $170 billion in bailout funds and has committed to an additional $30 billion.
Have you ever wondered why it is so important to bail out AIG? There are two primary reasons. The first is that the financial products unit at AIG provides special insurance coverage to hundreds of financial firms which use it to cover their losses from risky securities investments. This includes the banks and other financial institutions that have been burned by the loss in value of mortgage-based derivatives.
The second reason is that AIG has two million policyholders. Most of these policyholders depend on the company for their insurance and retirement savings needs.
The failure of AIG would severely hurt people in every state who have nearly all of their long-term savings with the company. Also, if the company failed, there would be no backstop for hundreds or thousands of banks and financial institutions that need the insurance proceeds to prevent their own failures. The effect of an AIG failure would be felt throughout the U.S. economy.
The Stimulus bill- full of surprises
The stimulus bill, which was authored in speaker Nancy Pelosi’s office, included the language approving the AIG bonuses. If the taxpayers in this country are going to be upset about the AIG bonuses, we need to get angry about the Fannie Mae and Freddie Mac bonuses as well.
Another recent revelation is that thirteen firms taking bailout money are behind on their federal taxes. They owe $220 million in back taxes. Two firms each owe more than $100 million each.
In an AP story that was reported in recent days, FDIC Chairwoman Sheila Bair has admitted that the government needs a new model for their bailout approach. Hmmm…do you think?
March 20th, 2009 at 6:31 pm
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