Who FNMA owe money to ? Surely those creditors are beiing indirectly helped by any bailouts because if the agency goes down they'll at least have to take a haircut? Like bailing out one big private company so it can pay what it owes to a bunch of others.

steve

Right-wing propaganda? Because I'm against bonuses for executives of corporations feeding at the taxpayer trough?

I'm with you comrade...

The problem is more widely one of compensation within publicly held companies, and in particular financial services companies.
Compensation schemes for executive level pay at many publicly held US companies are all out of whack. They often have little to do with performance OR are targeted at annual performance or worse share value performance, rather than long term goals. That often leds to prformance that skews to pay off for executives who then leave, and leave behind a hollowed out company. Add to that enormous golden parachutes... And leads to companies that have often pared R&D and core operating effectiveness meaning they can't grow.
Fannie and Freeddies executives are benfitting because of the general enviroment of compensation in the entire sector. They probably don't deserve their big bonusses but then a lot of bonusses being paid are excessive and undeserved.

There are several kind of bonus. Some bonuses will be contractual. Some will have been agreed years beforehand. To not pay those would leave an organisation open to legal action (which they would probably lose and so cost more than just the bonuses). For example, I know people who had a retention bonus which was payable after a few years as long as they remained at a company until a specific date. It was a written agreement. To not pay that bonus as agreed would have been breach of contract, regardless of what happened in the meantime (as long as the company still existed and they remained in employment).

Some bonuses are based on local targets or personal targets, and so while the overall operation may be failing, parts of it may be doing well. Usually the argument is that we need to reward success. Maybe some people in banks and other bailed out entities deserve bonuses because what they are doing is mitigating the problems that caused the bailout.

So it's simplistic to scream out against all bonuses for people at a bailed out company. Popular, and populist, and that's why people on the Left and the Right and in between do it.

The real argument is about how bonuses are set going forward, and ensuring that in cases where people have failed they are not getting a bonus which implies success. What I would be interested in seeing is the level of bonuses at Fannie and Freddie over the past years - has it been level year by year, has it gone up, or did it go down?

Are bonuses way out of whack? Certainly!

Is it the responsibility of the Government to regulate and mandate bonus structure? Not unless the agency or corporation is government supported. A private or public entity should be left to the Executive Board or the Shareholders. A government entity can have all the regulation you can throw at it...

b

private or public entity should be left to the Executive Board or the Shareholders. A government entity can have all the regulation you can throw at it

...

the way corporate law has been written, there is little to no protection for shareholders. In some cases shareholders are seeing little to no increase in dividends or share values whilst a corporations executive compensation component increases three and four fold. Even more. There are plenty of examples where share value, dividends and actual profits have fallen whilst compensation rose exponentially ... But the boards of directors do not rise up in anger...nay they are supine in almost all cases..

See, B, investors are getting screwed by excessive exectuive compensation too.
Directors form a compensation committee which gets reports from the same consultants who recommend increasing bonus packages etc. in order to stay in line with other companies, and it spirals up. There's no evidence that companies with increased executive compensation ever returned value to their shareholders proportional to their increase in compensation...
Fannie and Freddie, beleiving that they need to keep their executives for stability, can't be under priced in the executive talent market. Comrade Steve is right that its a problem of the entire sector...

Again, I just want to know what kind of corporation would pay big bonuses to executives who are pile-driving said corporation into repeated bankruptcies? What sort of board of directors would do this? Even liberals are taking note. Of course, I refer to McCain and Rockefeller:

WASHINGTON -- A bipartisan group of senators led by Jay Rockefeller (D-W.Va.) and John McCain (R-Ariz.) announced Wednesday that they want to ban bonuses for executives at Fannie Mae and Freddie Mac, the government-backed enterprises placed in conservatorship as part of the 2008 Wall Street bailout.

The Federal Housing Finance Agency, which oversees Fannie and Freddie, approved $12.79 million in bonus pay for 10 executives who met modest performance targets, Politico reported last week. Fannie Mae reported a third-quarter loss of $5.3 billion to the Securities and Exchange on Wednesday.

"It's inexcusable that anyone would think it's okay to hand out these bonuses,” Rockefeller said in a statement. "The American people deserve better and it's time we make sure that Fannie Mae and Freddie Mac act more responsibly with their money."

"It's outrageous that Fannie Mae and Freddie Mac executives would expect multi-million dollar bonuses after $170 billion in taxpayer bailouts and one in every four homeowners' mortgage underwater," McCain said. "This amendment makes clear that so long as Fannie and Freddie are in government conservatorship, bonuses such as these will not be paid out."

Can anyone defend this?

Why do these companies still exist? Why not let them go completely private?

If investors are so screwed, why does the Government do nothing? The answer: WHO CARES! IT IS NOT THE RESPONSIBILITY OF THE GOVERNMENT TO REGULATE BONUSES FOR PRIVATE/PUBLIC COMPANIES!

Show me in the Constitution where it is stated that government shall set limits on income of non-government employees. Until then you have a boatload of opinion, whereas I have written rules of Government.

Brad, in the case of FNMA, these bonuses are paid to managers who are receiving a quarterly bailout from the feds.

Answering RickyP's statement about investors and executive bailouts. I do consider Fannie and Freddie to be quasi govt agencies.

RickyP thinks all executive bonuses are exorbitant. I do not think they need to care about RickyP's opinion, or mine for that matter. The board and investors are the ones to ensure proper levels of compensation is met.

b

The board and investors are the ones to ensure proper levels of compensation is met

Pray tell how they do that?
Shareholders do not, in the US, have the right to call a general shareholders meeting and throw out the board if they disagree with compensation plans. Compensation plans are generally set by the executives themselves.(Usually by 'exectuive committess who consult with companies specializing in providing compensation advice. Who are used becasue they provide such lucrative advice...)

and the US , average public company CEO compensation is 400 times that of the average employee. And thousands of senior managers in addition to CEOs are drinking at the same frothy trough, especially, as we have all just seen, senior managers in the financial services industry. (By contrast, the ratio of CEO pay to that of the average employee has remained around 22 in Britain, 20 in Canada, and 11 in Japan

And compensation plans have often proven to be counter productive to the long term health of a company, and if you've followed out sourcing, have contributed to companies moving employment out of the country.
Part of the blame for the Financial melt down, exectuive compensation at financial institutions.

If boards start acting in the interest of the company and FIRING execs that act greedily, it will change.

Are you truly saying that the government is responsible for the regulation of executive pay and bonus management? Please tell me I am wrong, I would hate to think you had gone that for to the left...

Dan:

Who FNMA owe money to ?

FNMA has guaranteed a lot of mortgages that are underwater. As the properties are foreclosed or sold, FNMA must payout on those guarantees. They do not have a good handle on how much they are underwater or when the guarantee will be due.

Steve,

So your response to my contention that my we are going in the wrong direction (that too much wealth is going to the top and not the middle class) is to call me a socialist and/or a Marxist and then throw in an anecdotal story that in your case you are doing well because you work hard, save money, and don't spend that much.

Do you not see that there are different types of capitalism that we could have? We could have a socialist type economy where taxes are extremely high and incomes are flatter. But that is not what I argued. I pointed out that increases in our nation's wealth are going to a few. Since 1980 increase in U.S. wealth have gone exclusively to the top 20%, with the top 5% and top 1% getting a more disproportionate share. Why is that you think that people that work on Wall Street or in big business now are more talented than their predecessors? Let me ask some questions about fairness. If a company's profits are growing 20% a year do you think that all of those profits should go to upper management and shareholders or should some go to the workers? The financial sector was getting 40% of all corporate profits in 2008--do you think that it is an appropriate share of the nation's wealth (hence my Main Street vs. Wall Street comparison).

You talk it as if it is character issue--you're right in a way. The character flaw in at least some human beings is that they really like to get money for nothing. In other words, they want to manipulate things so that they make as much money as they can while doing the least that they can. That is what happened since 1980. U.S companies--through loss of union power, through giving U.S companies tax breaks to go overseas, allowing U.S. companies to either go overseas and hire cheap labor or by leveraging that threat to do so that they can pay workers less money--have frozen most U.S. workers out of sharing increases in wealth generated by their companies. Wall Street has created lot of financial vehicles to increase returns on money so that they can generate enormous commission fees.Communism is everyone gets the same, Socialism is not everyone gets the same but it's a lot closer, and the system you're lauding is basically only the top get the increase in wealth generated.

So spare me the talk about socialism or communism. Those are essentially straw man attacks. Please argue while middle-class incomes should stay flat while the incomes of the top 1% go through the roof. There are tremendous social implications when income goes disproportionately to the wealthy. The wealthy do not need public education (they send thier kids to private school), they do not need the police or fire departments (they can pay for their own private companies), and even for stuff they need they don't want to pay a disproporitionate share for that. Let's say there are a hundred dollars that could to a millionaire or to a hundred middle-class tax payers. Let's say that the tax money would be 25 dollars that would go towards building a road. In both instances, you would have $25 go towards building a road. but in one instance you have 100 people contributing towards this needed road and in another you have one person. The rich are not going to want to pay for that road by themselves--it's a lot easier to get 100 people to pay for a road then it is for one person. When you start seeing all of the money going towards the rich you start seeing huge problems paying for the safety net and for the costs of the government. What a huge coincidence that we are seeing all of these budget problems at the State and Federal level now that the rich are getting such a huge percentage of the pie.

Unions did not start because workers were getting treated fairly . Factory owners in the 19th century tried to pay them as little as possible. And since 1980 we have similar attempts to prevent workers from having any share in the profits of a company. They are lucky if they keep their job, probably have to work harder because other workers are let go to increase profits, have to start contributing more to health care costs, and their wages are not increasing.

You talk about social mobility in your case Steve but overall social mobility is falling. One reason is costs of college. According to Fox News college costs have risen 1025.4% since 1980. You did read George's recent post about the social problems that high school graduates have versus. college graduaties, didn't you? It is essential to have a college degree and lower and middle-income students have to deal with the fact that college costs have risen 1,000% in 30 years. A little bit faster than inflation, wouldn't you agree?

I am glad you are doing well--I suspect that most Redscapers have college degrees and are in the top 20%. But what about the bottom 80% Your solution work hard, save money, don't spend so much--I am sorry that is so much rubbish for those folks.

The conservative economic solution--low taxes, anti-union, free trade, free flow of money across borders, deregulation--was supposed to create enormous wealth. All it has done is shift the wealth towards the wealthy. This is a democracy and your economic policies should benefit more than just a few percent of the population. The Milton Friedman/Hayek / Ayn Rand adherents have been shown to be wrong--their policies have not worked. We need a more balanced approach, as existed before 1980 and worked just fine. I don't recall us living under a socialist or communist regime before 1980, so if I advocate returning to policies existing in those days I could not be socialist or communist

So I challenge you to make some argument that your economic philosophy benefits the majority of Amercians. Diatribes against socialist or communist strawmen do not count, neither do anecdotal stories.

b

If boards start acting in the interest of the company and FIRING execs that act greedily, it will change.
Are you truly saying that the government is responsible for the regulation of executive pay and bonus management? Please tell me I am wrong, I would hate to think you had gone that for to the left...

You understand how corporate law is written in the US? Written after corporate executives lobbied for extensive changes.
Boards rarely act independently, because they largely aren't independent. Shareholders have few rights and little power to effect change. They can't, for instance call shareholders meetings to challenge executive copmpensation.

When polled, 90% of institutional investors said they thought corporate executives were dramatically overpaid, and 85% of them said the prevalent executive compensation system hurts Corporate America's image, according to a Watson Wyatt Survey published on June 20, 2006. source:

http://www.businessweek.com/managing/co ... page_2.htm

I infer because you ignored this riposte this when I first posted, that you think somehow the average shareholder is happy with compensation levels? And they haven't revolted not becasue it is inordinately difficult to raise a challenge under current corprotre law but becasue they are thrilled at the results brought about by rises in compensation. Here's the thing. Thats not happening. And Because the cards are stacked against those who might want to see change there is little pushback.
Indeed the parts of Dodd Frank that require companies to publish CEO compensation ratios (to average worker) are being fought tooth and nail right now.. It seems that many want to fight even the right to know for a shareholder. And if you don't know what would complain about?

Ray Jay wrote:Dan:

Who FNMA owe money to ?

FNMA has guaranteed a lot of mortgages that are underwater. As the properties are foreclosed or sold, FNMA must payout on those guarantees. They do not have a good handle on how much they are underwater or when the guarantee will be due.

That doesn't answer the quesrtion though. Who is owed the money that they may have to pay out? Is it like AIG owing loads of money in guarantees to banks? Presumably if FNMA were just to be shiut down, its private creditors would risk losing heavily.