Diary

Obama's Bonus Duplicity

Wall Street bonus time is upon us and the shameless Obama “populist witch hunt smear machine” that we have all come to know over the past year is getting warmed up. As if on queue, from almost every corner of the media, journalists came forth, pitchforks in hand. In their columns, blogs and on their viewer free shows they grumbled: “How outrageous that these greedy Wall Street fat cat bankers are getting bonuses when the people on Main Street who funded their rescue languish in a state of unemployment.”

The New York Times reported breathlessly:

Bank executives are grappling with a question that exasperates, even infuriates, many recession-weary Americans: Just how big should their paydays be? Despite calls for restraint from Washington and a chafed public, resurgent banks are preparing to pay out bonuses that rival those of the boom years. The haul, in cash and stock, will run into many billions of dollars.

Industry executives acknowledge that the numbers being tossed around — six-, seven- and even eight-figure sums for some chief executives and top producers — will probably stun the many Americans still hurting from the financial collapse and ensuing Great Recession.

Goldman Sachs is expected to pay its employees an average of about $595,000 apiece for 2009, one of the most profitable years in its 141-year history. Workers in the investment bank of JPMorgan Chase stand to collect about $463,000 on average.

Additionally, Christina Romer, who chairs the White House Council of Economic Advisers, appeared on CNN’s “State of the Union and chided government-assisted financial firms that plan to provide massive bonuses to workers. “For heaven’s sake, people, it does seem really ridiculous,” Romer said.

Given the assistance the financial sector received to rescue them from collapse, Romer said she hoped they “would have some sense” as they consider bonuses.

Banks did get tax payer assistance. In fact, the banks were forced to take tax payer assistance. There was no option. But, the agreement was clear: once the money was repaid, there would be no additional oversight in regard to compensation. So the banks, one by one and as quickly as possible, repaid the money. Mogan, Goldman, Citi, et al. were again free to compensate as they deemed appropriate.

But something was missing in all the heated write ups about compensation. What about Fannie and Freddie? Logic would lead one to believe that because these two firms lost so much taxpayer money, 111 billion so far, they must not be eligible for bonuses.

And that, dear reader, is where you would be mistaken.

The executives at Freddie and Fannie are getting large pay packages, very large packages. 10 times larger than the average compensation package being paid at Goldman Sachs.

From the Wall Street Journal:

A release from the Federal Housing Finance Agency that also fell in the Christmas Eve forest reports that, after presiding over a combined $24 billion in losses last quarter, Fannie CEO Michael Williams and Freddie boss Ed Haldeman are getting substantial raises. Each is now eligible for up to $6 million annually.

Freddie also has one of the world’s highest-paid human resources executives. Paul George’s total compensation can run up to $2.7 million. It must require a rare set of skills to spot executives capable of losing billions of dollars.

Where is Treasury’s pay czar when we actually need him? You guessed it, Fannie and Freddie are exempt from the rules applied to the TARP banks. The government gave away the game that these firms are no longer in the business of making profits when it announced that the CEOs will be paid entirely in cash, though it is discouraging that practice at other big banks.

That’s great news for the executives at Freddie and Fannie. No pesky stock to deal with. Cash only. I guess when you consider that the stock is worthless it makes sense. Another positive for these two men is the fact that while the other institutions currently under the purview of the pay czar have to meet revenue and performance targets, these men don’t need to deal with those kinds of annoying details.

Also from the Wall Street Journal:

The government has directed both companies to pursue money-losing strategies by modifying mortgages to prevent foreclosures. Most of their losses are still coming from subprime and Alt-A mortgage bets made during the boom, but Fannie reported last quarter that loan modifications resulted in $7.7 billion in losses, up from $2.2 billion the previous quarter.

The government wants taxpayers to think that these are profit-seeking companies being nursed back to health, like AIG. But at least AIG is trying to make money. Fan and Fred are now designed to lose money, transferring wealth from renters and homeowners to overextended borrowers.

Handsomely compensated to lose our money? Some people have all the luck…unfortunately, it’s not the US Taxpayer.

Under normal circumstances, I would classify this duplicitous behavior as utterly shameful. But after observing the Obama administration for the past year, this type of slimy behavior is filed in the “just another day at the office” category. It’s unfortunate that we have a community organizer in the Oval Office who is a master at creating populist outrage. It’s even more unfortunate that there are useful idiots among the American citizenry who buy into the lies and deception that our dear President is selling.

crossposted to The Ritz Report