Tuesday, December 11, 2012

For Execs at Fannie and Freddie, it’s Always Christmas

I, for one, was not saddened when I read over the weekend that some Wall Street bonuses in year-end 2012 would lag behind those of previous campaigns. I don’t know about you, but when someone receives a year-end largesse of $10 million as opposed to $15 million, somehow I find it hard to elicit even a morsel of sympathy.

Especially when my I opened my holiday credit card statements.

I sort of knew I was in trouble this year when the CEO of the QVC channel sent a personalized holidayn card and addressed my wife and daughters by their first names.
Sorry, but I can’t worry about what’s currently going on in Washington. I’m nearing the precipice of my own fiscal cliff.

But I digress.

However, I did get quasi-incensed over  a story that broke just yesterday, where two of the largest and most troubled entities currently under government control (and that’s a rather lengthy list) – Fannie Mae and Freddie Mac – need even more scrutiny by regulators to ensure that the exorbitant pay structures commanded by their respective senior staffs are justified.

The two mortgage-financing entities, both of whom currently have siphoned close to $200 billion from U.S. taxpayers since being placed under receivership in 2008, have shelled out some $92 million in salaries for roughly 90 executives and an additional $455 million for 2,000 or so senior staff members.

Currently, the pay levels for Fannie and Freddie's senior level employees are set in-house by these toxic twins while their overseer, the Federal Housing Finance Agency, consults with the U.S. Treasury to establish the executive officer’s total comp packages.

In a rare show of bi-partisanship, both the GOP and Democrats have railed against the multi-million-dollar comp at both.  In fact, the FHFA implemented a revised salary program earlier this year that slashes the annual compensation of CEOs nearly 90% from about $5 million to $600,000 each.

In my former incarnation as a journalist, I covered the accounting debacles at both these bankrupt hulks. My spouse has spent 25 years as a mortgage underwriter, where she was often forced to make Fannie-Freddie loans (courtesy of the Community Reinvestment Act) to applicants whose credit histories were hard to read due to the sea of red ink and charge-offs.

Many had as much chance to meet these mortgage obligations as I did of dunking over LeBron James.

Hopefully, the F- twins will begin “winding down,” as Washington has stated that it intends to with them. But until then, they both will continue to show that that executive pay versus performance – particularly along the Beltway ­– can, and often does, travel in opposite directions.

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