Feds Snip Fannie, Freddie Golden Parachutes

The government said yesterday that it would forbid Fannie Mae and Freddie Mac from paying their fired CEOs their separation payments or “golden parachutes.” Experts estimate they were together up for $25 million. Political pressure had been mounting, with calls from both presidential candidates and other lawmakers to limit the departing execs’ compensation. Coupling this with the news about the Fed not bailing out Lehman Brothers means only one thing, we’ve entered the funnest part of the sub-prime aftermath, the punishment phase!

Fannie, Freddie chiefs lose ‘golden parachutes’ [Washington Post] (Thanks to Matthew!) (Photo: Getty)

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  1. Segador says:

    What sound does a CEO make hitting the ground at 250 MPH?

  2. BoomerFive says:

    I have to say I agree with this. There should be some culpability.

  3. BeeBoo says:

    Umm, why don’t you wait a year to see how things settle out before declaring that we’re now in the “funnest part of the sub-prime aftermath, the punishment phase!” This thing is still unravelling and it is going to affect everyone, not just the people who made millions off of it. Let’s just hope that our financial markets can be stabilized enough to prevent a domino effect of bankruptcies and defaults and a possible collapse of our financial system and even our currency. This is huge. It is serious. It is NOT something to joke about.

  4. johnva says:

    Good. If taxpayer dollars are going to go to “rescuing” these companies, I sure as hell don’t want them going to the people responsible for their downfall.

    Now if only we could pass a law requiring something similar whenever a publicly-traded company goes bankrupt and their CEO is fired…

  5. buckfutt says:

    That’s fine, but they also need to go back and prosecute the Fan-Fred corporate officers over at least the last dozen years, starting with Fraknlin Raines (one of Obama’s top economic advisers; he pocketed $90 million) and Jamie Gorelick. She was the financial VP when Fannie cooked the books to give their execs (including herself, to the tune of $24 million) giant bonuses.

    Never happen, of course; Fannie and Freddie executive and board positions were political payback for hacks to get rich after they’d “left” the government. They’re all too well connected, and the media won’t go after them (too many are Democrats).

    • chargernj says:
    • lannister80 says:

      @buckfutt: Blah blah anti-democrat rant blah blah.

      Everyone has their hand in the cookie jar, dems and pubs alike.

      • ELC says:

        @lannister80: Oh, but there seem to be so many MORE facts tying the Dems to the cookie jar. That’s a fact that is hard to ignore.

        • johnva says:

          @ELC: Who was in power of both the Congress and the Executive branch from 2001-2007? That’s a fact that’s hard to ignore.

          • Bladefist says:

            @johnva: Lets not fight over which side is more responsible, I think we all know it was both sides, and if a democrat was in power, would have done the same thing Bush is doing, inregards to the bail out.

            Parties aren’t corrupt, PEOPLE are corrupt. As soon as you guys figure that out, we can start putting better people in office. Maybe we’ll start in 2012.

            • Trai_Dep says:

              @Bladefist: Yet one side is saying, the root cause of all problems is regulation, while stripping away regulators’ ability to punish transgressors. Indeed, it’s their core philosophy.
              I guess it’s sort of like the telecom immunity deal: since 99.9% of one party and 20% of the other party were for it (and the latter comprised the entire body of politicians voting against it), they’re equally liable. Nice logic there.

              • Bladefist says:

                @Trai_Dep: Government sponsored banks fail, your answer: More Government. Nice logic there.

                In capitalism, if you can’t make it, you close down your doors. In Government-ism, you keep wasting tax payer dollars trying to make an idea, that cant work, work.

              • Bladefist says:

                @Trai_Dep: You want to punish transgressors? Let them put themselves out of business. They use government regulation for their own financial gain.

            • soapdish says:

              @Bladefist: “Lets not fight over which side is more responsible,”

              That sounds suspiciously like a line I would expect to hear from the side that is more responsible for the problem.

              • Oxzimmaron says:

                @soapdish: Dang! You beat me to it!

              • DallasPath says:

                Anyone who believes that either political party is squeaky clean, ethical, and without corruption is riding the train to delusionville. Both sides are dirty and full of cronyism. This isn’t a government of the people, for the people, and by the people….this is a government where policy can be and is sold to the highest bidder regardless whether you ride on a donkey or elephant.

                Obama and McCain don’t care about any of us. They are BOTH like a sleazy guy at a bar, saying anything to get in our pants so they can fuck us. Nothing is going to change until we as Americans get off our collective asses and call out Washington for their shenanigans. No more lobbying. No more pork. No more bureaucracy. It’s the partisanship that keeps us divided and weak.

            • Parting says:

              @Bladefist: That’s not a bad idea. But seeing Republican candidate… There’s little hope for USA’s.

              Ex-USSR, before collapsing, had some old leaders, like verrry old. Like McCain dozing off on camera, and not noticing old. Well, you know how it ended.

    • reed311 says:

      @buckfutt: Nothing like coming to the consumerist to hear someone try to make cheap political points. Ahh well, I guess that’s all you can do because it probably wouldn’t be wise to talk about who was in power for the past seven years.

    • Erwos says:

      @buckfutt: Prosecute them for what? You seem to think that making obscene amounts of money is a crime, but I’m pretty sure USC doesn’t cover that.

    • TouchMyMonkey says:

      @buckfutt: Ok, so what was Franklin Raines’ role in the Fannie/Freddie meltdown? You seem pretty well-versed in the one who was NOT part of Barack Obama’s inner circle, how ’bout some clarification on the other one.

      By the way, I worked at McDonalds almost 30 years ago; am I responsible for the national obesity epidemic?

      • vdragonmpc says:

        @HurtsSoGood:

        You DO know how some banking systems work right? We are now finding out that ol’ Greenspan screwed up on the whole mortgage rate thing over the years. They thought the ARMs were the next best thing to sliced bread. They STARTED going wild in the 90s..

        How do you think that couple you know who work at wal-mart and the saw mill have a 200k+ house and 2 new cars? They counted on voodoo financing.

        I couldnt understand how I was under a serious microscope when I bought my house. They asked about a 12 year old 200$ credit card I had but forgot about and never used… Among other things but I got a regular set rate and have been paying for a long time. But I have some friends that have huge houses and new car payments without the income to match the payment numbers I was given which were house payment cannot be over 33% of income.

        Im proud that they stopped these scum from getting a parachute o’ gold… I say we give em shoes o’ with cement and see if they swim!

  6. Nogard13 says:

    I never understood how CEOs that wreck companies walk away with so much money. If they cost the company billions, why do they get compensated?

    • Blitzgal says:

      @Nogard13: I agree! But I’m too cynical to think this decision is going to stand.

    • cf27 says:

      @Nogard13: Because they negotiate that payment upfront. These things are never awarded after the fact. In general, the only way the company can avoid paying them is if the officer was fired for cause.

      @soapdish: Obama collected $120,000 in campaign donations from Fannie & Freddie since 2005. What did they think they were buying?

  7. buckfutt says:

    So prosecute all of them. Fine with me. But that’ll never happen; Raines and Gorelick are both protected by the media and the bureaucracy.

  8. buckfutt says:

    Show me one incorrect point of fact in my post. Just one. Then you might have a point.

    Raines and Gorelick were both Clinton Administration officials, as was Jim Johnson, another Fannie fraudster to the tune of millions. He briefly led Obama’s vice-presidential search until somebody Googled him.

    They’re crooks. Prosecute them. If there are GOP appointees who fit the bill, prosecute them, too. No argument here.

    • chrisjames says:

      @buckfutt: The points of fact are, as always, correct. The implications and innuendo are wildly unsupported, though.

      How are those people responsible? Was the place crumbling around them at the time while they siphoned the profits? Explaining things, even in specious terms, would make it more argument and less conspiracy theory.

    • iMe2 says:

      @buckfutt: The current (well, former) chairman of Fannie Mae is an economic advisor to McCain.

      You have been balanced! (But I’m amazed at the level of Obama worship, like he’s the King Midas of politicians)

  9. buckfutt says:

    They cooked the books to give themselves bonuses. At Enron that was a crime. Why not at Fannie? Only difference I can see is, the Enron creeps stole from their shareholders, while the Fannie-Freddie crooks stole from everybody who pays taxes.

    [online.wsj.com]

  10. Ubermunch says:

    Hmmmm… Lawsuits from said execs in five…. four…. three…. two…. one….

    How much will the court cases cost?

    • johnva says:

      @Ubermunch: So we should just “pay the ransom” because they might sue otherwise? That sounds suspiciously like a protection racket.

      • WarOtter - I went to Japan and all I got was this tumor. says:

        @johnva: You just described the RIAA in a nutshell

      • erratapage says:

        @johnva: The lawsuits are inevitable based on contract law. It is possible that Freddie and Fannie will win (since I haven’t read the employment contracts).

        No one is suggesting that payment should be made… just predicting that the lawsuits will occur.

        • johnva says:

          @erratapage: Yeah, I realize that lawsuits may be unavoidable. My only point is that we shouldn’t just settle lawsuits based on fear of how much the litigation might cost, if we think we’re in the right. The high cost of the legal system has become a sort of game where the lawyers hold everyone else hostage, and I’m sick of it. I’d love to see some lawyers start getting punished for filing unethical lawsuits (not saying this one is necessarily unethical), but I doubt that will ever happen since our country is run by evil lawyers.

          • Erwos says:

            @johnva: Why? I mean, you’re denying these guys compensation that they were contractually obligated to. I’m not sure how denying them this money is somehow “the right thing to do”.

            • Bladefist says:

              @Erwos: As a conservative I would typically agree with you, and I don’t participate in the hating of the obscenely rich. No class warfare on my part.

              However, it’s tax payer money being used to bail out a company. If the tax payers didn’t save them, they would be getting nothing anyway, because the ‘company’ would essentially go out of business, and have no money.

              You can’t pay someone money where money doesn’t exist.

            • johnva says:

              @Erwos: First off, I wasn’t really claiming to make a moral judgment on whether it is right or not in this case. I don’t really know. But one might argue that it’s a little different when taxpayers are footing the bill vs. shareholders. I’m not okay with my tax dollars going to that type of bonus.

  11. picardia says:

    Although CEO overcompensation is egregious, it is usually not criminally actionable. And alleging that this is something only Democrats do is pretty laughable. This kind of thing is rampant throughout the American corporate world. (For all I know, it’s the rest of the corporate world too, but I’m only familiar with the U.S.) Most of the time they don’t have to cook the books to get these outrageous salaries and enormous leaving bonuses; somehow this kind of thing has become commonplace and ordinary, the least a corporate CEO should expect. It’s insane.

    • @picardia: “This kind of thing is rampant throughout the American corporate world. (For all I know, it’s the rest of the corporate world too, but I’m only familiar with the U.S.)”

      In Japan (for example), it’s considered bad form and sort-of “unpatriotic” for top executives to be compensated that much more than the lowest-paid workers. Keeping the pay scale closer together is seen as a good thing for the country as a whole; by helping to ensure the lowest-paid workers are paid enough, it keeps the economy much stronger than when there are a few very wealthy and many borderline poor. Success belongs to the whole group, not just the leader. It’s very much a function of a more collectivist society, but it DOES have real economic and capitalistic benefits.

      US executive compensation levels can cause problems with US companies go to Japan, or want to partner with Japanese companies.

      • johnva says:

        @Eyebrows McGee: The primary capitalist benefit of keeping incomes more equal is that the middle class is who actually BUYS the bulk of things put out by corporations. Your country isn’t doing so well when your middle class is contracting rather than expanding.

        Japan had some serious labor violence in the last century, bordering on communist revolution (late 19th, early 20th century). They sort of learned their lesson about sharing the fruits of their economic output a little more equally in order to keep society a bit more peaceful. I hope that isn’t what it will take here.

      • Jevia says:

        @Eyebrows McGee: Isn’t that a form of socialism? Not that I’m against it, there are parts of socialism I rather like, but I know that anytime a someone starts to utter the phrase “universal healthcare”, others people go all up in arms over the ‘evils of socialism’ when in fact, there are economic (and as you say capatalistic) benefits. Frankly I think this country does need a little bit of a ‘worker revolution’ because of the huge gap between the rich and the poor.

        • johnva says:

          @Jevia: Yes, it’s a mix of socialism and capitalism. That’s how we should do things here (and in fact, we do have a mixed system, but not a very good one). Extreme ideologies (communism, extreme economic libertarianism) don’t work, because they don’t account for human nature (which is often greedy and lazy). But it’s hard to make any progress on this in this country when we have one side of the aisle screaming that anything except for total economic freedom is akin to communism.

        • @Jevia: “Isn’t that a form of socialism?”

          I don’t think so, because it’s not mandated by the government or done through the government; it’s a societal understanding that CEOs aren’t worth that much more than their middle mangers and factory-line workers and janitors. It’s also an awareness that a strong economy requires strong consumer classes, and that the wealthy are the very smallest consumer class. Henry Ford understood this and paid high enough wages for his workers to afford his cars, and he wasn’t a socialist. :)

          That Japan has held on to this vision of corporate remuneration in the current climate when top executive salaries have gone stratospheric and they are compensated out of proportion to their contributions (IMO), is because Japan’s a more collectivist, less individualistic, society, where the good of the group is seen as as important as a good of the individual. But that doesn’t make it socialist per se; just a difference in values and world view.

          (Now, Japan does have policies that are analogous to European-style social democracy that one could call socialism (though one is asking for a fight when one flies that flag!), but this isn’t in that set.)

  12. buckfutt says:

    Check the WSJ link above, it runs down the financial details (it’s also four years old, which tells you all you need to know about how well all of these people are protected).

    It’s just as much of a scandal that Fannie and Freddie were allowed to lobby and give bazillions in campaign contributions to Congress. Both parties are equally complicit in that scam.

  13. Aeroracere says:

  14. Sam Glover says:

    Let’s just hope taxpayers’ money doesn’t instead go into a multi-million dollar lawsuit over the golden parachutes.

  15. ironchef says:

    The shareholders for all publicly traded companies should have this power.

    Wouldn’t that be an improvement if CEOs were ultimately accountable to the shareholders to get their final severance check.

    • GearheadGeek says:

      @ironchef: In theory, the shareholders of all public companies DO have this power, at least indirectly. The problem is that huge blocks of shares are often held by institutional investors, which put people on boards of directors and those people want their unearned piece of the big pie! Someday when they grow up they’ll be CEOs too (or already are a CEO at Company X and sit on the board of companies Y and Z.)

      Between the institutional investors and the large group of silent investors who either never return their proxies or rubber-stamp the self-serving suggestions of the board, it’s difficult in practice to fix this.

  16. processfive says:

    Gosh, wouldn’t it just be poetic justice if being denied their golden parachute payouts caused the suits in question to default on their own personal loans?

  17. battra92 says:

    On my lunch break today I caught a few minutes of Rush Limbaugh. He made a great point about how we don’t need more regulation per se, we need more accountability.

    I think this is a step in the right direction. We need to see firms go under and be punished. They’re like a child, if they never are punished they never learn.

    • angryhippo says:

      @battra92: Can you have accountability without rules to be accountable to?

      And why is it only “class warfare” when the rich get their hand smacked but not the other way around?

    • johnva says:

      @battra92: He would say that. The GOP is dead if people realize that its core philosophy of the promotion of corporate greed above all else is the root cause of all these problems. He’s just protecting his masters and their profits.

      The truth is, we need to reimpose some of the regulations that have gone away AND we need more accountability. A BIG part of the problem, he’s right, is that the current Administration has failed to vigorously enforce existing laws. While obviously this crisis goes deeper than just mortgages, a lot of the shady things that were widespread in the mortgage industry in the last few years were actually ILLEGAL. But since there was so much money to be made, people ignored the law since the government was not willing to do anything to stop them. Even though this whole mess was totally foreseeable and foreseen. Maybe we don’t need extensive new regulations; I don’t know what the best solution is. But no regulations are going to do any good if our government refuses to enforce them. And it’s just a fact that people who are against regulation ideologically are often going to be against enforcing regulations. Political choices matter, people. Elections are not just a game where we pick which guy or gal we most identify with.

  18. we’ve entered the funnest part of the sub-prime aftermath, the punishment phase!

    a phase which will likely include a lot of hard working people who did nothing wrong losing their jobs as these companies are re-organized and streamlined.

    What a fun phase, indeed!

  19. HeartBurnKid, creepy morbid freak says:

    For once!

  20. P_Smith says:

    A real punishment for corrupt banks and investment houses would be rescind and force repayment of all share dividends paid out by these companies for the past 5-10 years, or at least the period the idiotic ARMs were handed out like candy.

    To anyone who says, “But that will hurt middle class people who bought investments!” that may be true, but compared to the damage in lost jobs and taxpayer funded bailouts, the damage and number of middle class people affected would be miniscule.

    Nearly all of those who own shares and sought to profit from investments are wealthy who bought shares that pay less in income tax than minimum wage earners. Let those bastards bear the brunt of the damage, not those who work for a living.

  21. u1itn0w2day says:

    On one hand I understand trying to make as much as you legally can but on the other you have to realize that you are in the public in a publically traded company.

    What really bothers me is the people working for these companies that approved these salaries and bonuses.More scrutiny should go twards the boards of directors and executives that participated negotiations and signed off on these salaries and bonuses.

  22. ELC says:

    Dear God I hope so:

    “Coupling this with the news about the Fed not bailing out Lehman Brothers means only one thing, we’ve entered the funnest part of the sub-prime aftermath, the punishment phase!”

    If the govt (read, “the American people”) keep having to bail out failed BUSINESSES, then we are screwed, our economy is screwed, and the free markets that are supposed to make us great are screwed.

  23. mac-phisto says:

    oh, come on, throw these guys a bone already. toss them each 1,000 shares of common & call it a day.

    i don’t consider eliminating their bonuses “punishment”. punishment would be taking their homes, their yachts, their bank accounts & letting them enjoy the true fruits of their labor. let’s see them try to find a new job in this economy with “looted & tanked a 70-yr old fortune 500 company” on their resume.

  24. synergy says:

    I think punishment would actually be to make them repay their salaries for the last couple of years. They obviously weren’t earning them.

  25. the-perfect-face-for-radio says:

    i have a little bit of nero in me. i want to fiddle while rome is burning, but my problem is, i can’t play a fiddle worth shit. i’m rock-solid on the kazoo though. i could be the kazoo soloist for the berlin philharmonic, that’s how solid i am.

  26. smackswell says:

    I don’t know if this part is the most fun, or the “hunting for bare necessities after the country hits rock bottom” stage.

    I’d rather see some more fitting punishments for the downfall of countless families and businesses.

    Waterboarding was deemed “not torture,” correct? Can we start with that?

  27. S-the-K says:

    I think the only people who think that a C-level executive (CEO, CFO, COO, etc) should receive a multi-million severance package for driving the company into the ground instead of one red cent and a kick in the crotch from every employee of the company is the Board of Directors. Board of Directors are comprised of C-level executives of companies that the C-level executive at the ruined company is on the Board of Directors of.

    They all give each other raises. They all give each other golden parachutes. Everyone gets rich except for the employees and the shareholders.