Kissing or Kicking the Fanny of Fannie and Freddie?

By John W. Lillpop


President Barack Obama displayed a goodly bit of presidential wrath last month over bonuses to be paid to AIG executives after the insurance carrier had accepted over $170 billion dollars in corporate welfare from American taxpayers.

Recall, please, Obama's hell and brimstone oratory of March 16, reported in part by CNN, see Reference 1:

"President Obama said Monday he will attempt to block bonuses to executives at ailing insurance giant AIG, payments he described as an 'outrage.'

'This is a corporation that finds itself in financial distress due to recklessness and greed,' Obama told politicians and reporters in the Roosevelt Room of the White House, where he and Treasury Secretary Tim Geithner were unveiling a package to aid the nation's small businesses.

The president expressed dismay and anger over the bonuses to executives at AIG, which has received $173 billion in U.S. government bailouts over the past six months.

'Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?' "


Those words were among the harshest public comments coming out of Washington D.C., during a blistering firestorm that drove the U.S. House to pass a draconian bill to tax AIG bonuses at a rate of 90 percent.

With that fury as a benchmark, one would expect that any proposed bonuses to employees of Fannie Mae and Freddie Mac, the failed and bailed mortgage giants, would be lean and mean, at the very least.

However, one would be mistaken, once again, as the Obama administration continues it habit of making incomprehensible, mind boggling, and utterly illogical policy decisions on a near daily basis.

With respect to Fannie and Freddie, bonuses are still very much in play as reported, in part, by the New York Times in Reference 2:


"Fannie Mae and Freddie Mac, the two troubled companies at the heart of the nation’s mortgage market, are set to pay their employees 'retention bonuses' totaling $210 million, despite calls from lawmakers to cancel the payments.

The bonuses, which were made public on Friday, were defended by the companies’ federal regulator, James B. Lockhart, who said he intended to let them proceed.

In a letter sent last week to Senator Charles E. Grassley, an Iowa Republican, Mr. Lockhart disclosed that 7,600 Fannie and Freddie workers were scheduled to receive pay outs aimed at retaining those 'employees most critical to keep and difficult to replace.' Under the plan, 213 employees will receive retention bonuses worth more than $100,000 this year, and one Freddie Mac executive will receive $1.3 million.

Those figures drew sharp rebukes from Mr. Grassley and other lawmakers, who noted that Fannie and Freddie had received pledges of $400 billion from taxpayers to offset huge losses since they were seized by the government in September. Similar bonuses paid by the American International Group, which was also bailed out by taxpayers, incited fiery attacks from the White House and legislators when they were revealed last month.

'It’s hard to see any common sense in management decisions that award hundreds of millions in bonuses when their organizations lost more than $100 billion in a year,' Mr. Grassley said in a statement. 'It’s an insult that the bonuses were made with an infusion of cash from taxpayers.' "

So, why has President Obama failed to order James B. Lockhart to cease and desist in this "outrage" that will cost taxpayers $210 million dollars?

After all, if the president found it within his pay grade to unilaterally dump the CEO of General Motors, stifling an employee of the federal government would seem very doable.

Not to be overly impertinent, but does the Obama policy with respect to Fannie Mae and Freddie Mac have anything whatsoever to do with presidential election year politics, campaign donations, or South Chicago mobsters?


Ref 1

http://www.cnn.com/2009/POLITICS/03/16/AIG.bonuses/

Ref 2

http://www.nytimes.com/2009/04/04/business/04bonus.html