On September 6, 2008, the director of Federal Housing Finance Agency (FHFA), announced that the government sponsored enterprises Fannie Mae and Freddie Mac would be placed under conservatorship. Conservatorship is a legal concept in the United States of America, where an entity or organization is subjected to the legal control of an external entity or organization, known as a conservator. That same day U.S. Treasury Secretary Henry Paulson stated that “I attribute the need for today’s action primarily to the inherent conflict and flawed business model embedded in the government sponsored enterprises (GSE) structure, and to the ongoing housing correction.”
Fast forward almost four years later and the federal government is finally taking a step in the right direction. The House Financial Services Committee voted 52-4 on Tuesday to cap salaries for top executives, stop future bonuses, and to bring the agencies salaries in line with the federal pay scale. These two mortgage giants have foreclosed on millions of homes. They both own or guarantee about half of all mortgages in the United States. Both firms have already received $170 billion in taxpayer bailout money and are requesting $14 billion more. The reason for the bailout, both companies took big loses on risky mortgagees they purchased. It seems unfair to me that the taxpayers are bailing out companies that made bad business decisions.
These top executives are earning million dollar paychecks and claiming the company needs taxpayer money to stay afloat. This citizen finds that pill very hard to swallow. I think it’s time that these top executives feel the squeeze on their pocket books. It’s all about greed. Fannie’s CEO Michael J. Williams received $5.6 million last year and Freddie’s CEO Edward Halderman received $5.4 million. While the refinance programs were supposed to help as many as 7 million borrowers it only assisted 1.7 million. Why is the bulk of the money going into the pockets of the executives? Under the recently proposed bill the top executives would only be allowed to earn around $220,000. It’s hard for me to imagine that these people have really earned those million dollar paychecks. The $220,000 annual salaries seem fitting. Edward DeMarco, acting director of the Federal Housing Finance Agency, said that the bonuses are being used to keep talented executives with the companies. If these top executives of these too big to fail companies are that talented then they would have never put themselves in such a financial disaster. I understand the need for competitive wages. I also understand the incentive of bonuses. I understand that these executives handle millions of dollars. I’m not opposed to million dollar salaries. What I am opposed to is my hard earned money funding their lavish lifestyles instead of helping my fellow American.
Sources:
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Politico
I completely agree with your stance on limiting the annual salaries and bonuses for the top executives of the near-monopoly lending institutions, who do nothing much more than sink people further in to debt with uncontrolled interest rates on various loans, and then turing around and requesting government bail outs after they take so much of the American taxpayers hard earned dollars. Now, with the bailout money, funded by American taxpayer dollars, to fix the risky mortgage packages that these entities bought, this puts the average middle class American at an even greater disadvantage for ever being able to buy a home, or purchase one at a livable and decent interest rate.
ReplyDeleteMuch like the Sarbanes-Oxley law/initiative that was enacted to regulate the Telecom industry and ultimately all industries, controls need to be put in place for these large lending companies. If taxpayers could sink their own hard earned money in to their own savings as opposed to helping companies like these stay afloat, who only exist to hurt others with their bad business decisions, then Americans would not need these types of lending services in the first place (in a perfect world, but it is a grand notion nonetheless).