More troubling still, it seems executives at Fannie and Freddie had a say in determining their own pay scales:
When FHFA established the Enterprises’ overall executive compensation packages in 2009, it did not act alone. FHFA consulted with the Treasury Special Master for TARP Executive Compensation, Kenneth R. Feinberg, and outside compensation consultants hired by the Enterprises and FHFA. Additionally, senior executives from the Enterprises themselves were closely involved in the decision-making process It remains unclear what role executives at the Enterprises have played in determining their annual pay since, but their influence on the pay packages in the first place raises questions about the process by which executive compensation is set at the Enterprises. These annual targeted compensation processes will remain in place indefinitely, unless they are modified by FHFA. However, FHFA has shown no willingness to take action to change them.
Not only did the execs help decide what they were going to get paid, but the bonus structures were based on profitable companies, and not ones which were a key cause of the current economic meltdown:
The Enterprises paid outside compensation consultants $655,000 in 2008 and $560,000 in 2009 to determine their own pay structure. To arrive at salary levels, the consultants assisted the Enterprises in identifying compensation at “comparable” firms. However, instead of looking to truly similar institutions like Ginnie Mae, FHFA, or the Federal Housing Administration (FHA), the institutions that the consultants identified — large banks and insurance companies like Bank of NY Mellon Co., MetLife, Inc. and Capital One Financial Co. — were anything but comparable to Fannie and Freddie. If these private sector institutions were not profitable by themselves, as is presently the case with the Enterprises, instead of being handsomely rewarded with bonuses, their executives would likely be fired.
Worse, apparently FHFA doesn’t even have the tools needed to keep control of compensation at Fannie and Freddie, according to the IG:
FHFA-OIG found that FHFA’s executive compensation “oversight processes lack a number of key controls necessary to ensure their effectiveness.”
The congressional report’s conclusions were damning as well:
As Fannie and Freddie enter year three of their conservatorship, little progress has been made to wind them down. The Enterprises continue to lose billions of dollars and continue to milk the American taxpayers for more and more financial support. Meanwhile, executives at Fannie and Freddie, influenced by perverse incentives and rewarded by questionable performance criteria, continue to receive enormous compensation packages.
The left has complained about executive pay for several years now, and Obama himself in 2009 capped executive salaries at $500,000 for companies receiving “exceptional bailout assistance.” He said at the time:
This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. But what gets people upset — and rightfully so — are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers.
Billions in losses and payouts from the Treasury would certainly seem to be “exceptional assistance.” Moreover, any CEO at a private company taking these kinds of losses year after year would be “invited to resign” if he wasn’t fired outright. So why are these two, indeed these six, still employed?
This would seem to be a larger issue than one presidential candidate being paid for his advice when he was a private citizen.