By Joe Miller. Yesterday, top executives at Fannie Mae and Freddie Mac defended exorbitant $16 million pay bonuses for themselves even though they presided over epoch failures of their agencies.
By way of background, Fannie Mae and Freddie Mac are ground zero of the current financial crisis because of their government insured positions as a “mortgage backstop.” Long story short, Fannie Mae and Freddie Mac performed the duty of garbage dump when the big banks decided that they could no longer hold onto worthless mortgage securities. In the interest of the federal government’s desire to artificially increase American home ownership, these two GSE’s (government sponsored enterprises) were allowed to drown in billions of dollars of debt.
As a result, the American taxpayer – already the de facto owners of Fannie and Freddie – coughed up at least $170 billion in order to bail out the two firms since 2008. Knowing how accounting is done in Washington, the actual taxpayer bail-out will likely be several times this. In essence, as with many other bailed out institutions, Fannie and Freddie are on life-support, similar to the zombie banks of Japan in the mid-90s.
Those who track the daily activities of Washington D.C. aren’t surprised to see millions of dollars being paid out to those at the top of these zombie firms. Nearly $13 million will be paid out to just ten Fannie and Freddie executives this year. These exorbitant bonuses can’t be based on exceptional performance as Fannie and Freddie are presently almost entirely dependent on taxpayer funds for their mere survival.
In the private sector, entities go out of business if they cannot come to terms with their debt and obligations, and that’s the way it should be. But in the DC climate, the rules of economics are often corrupted in order to benefit the politically connected. Some call this “crony capitalism.”
Obviously, this is not the first time that millions of dollars have found their way into the pockets of those with the right friends in high places. A quick look at the stories concerning former Fannie and Freddie executives Franklin Raines and Jamie Gorelick reveal that running a business into the ground with the federal government’s blessing is often a real positive for the personal balance sheet. Gorelick took in nearly $24,000,000 during her federal tenure while Raines raked in a cool $90,000,000.
Raines has even been accused by an oversight agency of aiding in accounting errors and hiding losses in order to recoup large bonuses. Both Gorelick and Raines were high ranking officials in the Clinton administration, and to this day nothing has come of their unbelievable conduct while at Fannie and Freddie. But that’s the way it works for some in America.
In order to truly end the corruption in Washington D.C. that has caused the taxpayer billions of dollars and has unraveled the fabric of our republic, there must be widespread replacement of those in power. The entrenched political class, who protect their friends with power and influence, simply has to go. This is why we need candidates and office holders who are willing to fight the tough fight and who refuse to “go along to get along.” Calling all Andrew Jacksons …