On Christmas Eve, the Department of Treasury said that it would remove the $400 billion cap on Treasury's funding of Fannie Mae and Freddie Mac, the two bankrupt government sponsored enterprises that Secretary Tim Geithner said were at the "epicenter" of the financial crisis. The move gives the failed GSEs unlimited taxpayer funded bailouts to cover losses incurred as a result of their managements' recklessness and their boards of directors' oversight failures. Geithner's Treasury essentially turned the two failed GSEs into full government agencies and further exposes taxpayers to losses that the GSEs may incur in the future. The two GSEs are expected to report losses in the billions for 2009. Also on Christmas Eve, Fannie and Freddie disclosed that they received approval to pay $42 million in compensation packages to 12 top executives (all federal government employees and payable in cash) for 2009. Interestingly, the Democrats, led by Geithner and Rep. Barney Frank (D-MA), have launched an all out attack on capitalism by attempting to restrict the compensation of Wall Street firms they deem to be too profitable.What, the max pay for a Fed Exec is $170k I think. That's all any of these Exec's in these agencies or AIG or GM or Chrysler should be making... that's it.
Fannie Mae and Freddie Mac are government created duopolies charged with providing liquidity to the mortgage market by purchasing mortgages from lenders and either holding those mortgages in their portfolios or packaging the loans into mortgage-backed securities that are sold to investors. Fannie and Freddie were privately held companies that generated big profits for their managements, boards of directors, and shareholders by being beneficiaries of advantages not shared by their competitors, including an implicit federal guarantee (i.e., a taxpayer bailout if the companies failed). Their managements and boards of directors, including former Freddie board member and current White House chief of staff Rahm Emanuel, are textbook examples of recklessness having put Fannie and Freddie in a position to cost taxpayers by chasing compensation targets and carrying out Democrat housing policies without concern for market risks. The taxpayers were left with two failed companies and potential liability of up to $400 billion as a result of the GSEs being put into conservatorship, but due to Geithner's Christmas Eve spectacular, the taxpayers are now liable for all of Fannie's and Freddie's losses.
Update: Hurray for Roskam! H/T Illinois Review
Today, Congressman Peter Roskam (R-Ill.), Deputy Whip and member of the Ways & Means Committee, introduced The Protecting Taxpayers From Excessive Compensation Act, calling for new pay accountability rules for Fannie Mae and Freddie Mac. Roskam’s proposed legislation would prohibit any employee of Fannie Mae or Freddie Mac, while the entities are under conservatorship or receivership, from being compensated more than any member of our Armed Forces.