Congressman Jim Gerlach
Editor’s Note: The following was submitted and written by U.S. Rep. Jim Gerlach. To submit your own opinion pieces to Phoenixville Patch, e-mail [email protected]. Opinons expressed do not necessarily represent those of Phoenixville Patch.
Based on the epic housing meltdown stoked by sub-prime mortgage giants Fannie Mae and Freddie Mac, executives at the two government sponsored entities must dread their annual performance evaluations.
Try explaining to your boss how even though taxpayers forked over a whopping $170 billion since 2008, you still managed to lose $4.4 billion in the third-quarter of this year.
Or that it’s going to take even more taxpayer help, roughly another $6 billion, to stave off a total collapse.
The losses incurred by Fannie and Freddie in recent years were so devastating that, according to a Bloomberg News report, it “erased the company’s cumulative profit since it became a public company in 1970.”
My guess is that with a track record like that on your resume, a bonus would be the last thing on your mind.
But somehow the federal bureaucrats responsible for keeping an eye on Fannie and Freddie and your tax dollars acted more like lapdogs than watchdogs.
At a time when bank regulators are tying the hands of community banks and tightening the credit available to small business owners, the bureaucrats at the Federal Housing Finance Agency (FHFA) gave their blessing to bonuses totaling nearly $13 million to the top executives at Fannie and Freddie.
That’s $13 million that will not be used to help deserving families buy homes or struggling homeowners avoid foreclosure.
In 2010, FHFA approved similar pay packages.
According to Securities and Exchange Commission filings, Fannie Mae paid its top six executives $15.4 million in salaries and bonuses last year. Fannie Mae chief executive officer Michael Williams earned $5.6 million.
Freddie Mac paid its top five executives nearly $18.5 million. Freddie Mac chief executive officer Charles E. Haldeman Jr. was paid $5.4 million.
Egregious does not begin to describe these bonuses considering the huge federal budget deficits and the unacceptably high jobless rate in our nation.
The President should rescind the bonuses. The White House has shown absolutely no restraint in lecturing and regulating private job creators about perceived excesses.
This is the same administration that gave us an unprecedented expansion of federal regulatory authority in the form of the Dodd-Frank law, but made sure Fannie and Freddie were exempt from executive compensation limits placed on many private companies.
Congress also needs to protect taxpayers from being forced to subsidize such recklessness in the future.
The House Financial Services Committee took an important step this week, approving the proposed Equity in Government Compensation Act by an overwhelmingly bipartisan 52-4 margin.
The legislation, which I have co-sponsored, would ensure that executives and employees of Fannie Mae and Freddie Mac receive compensation on par with pay practices at federal financial regulatory agencies. The bill does not make them Federal employees, but it aligns their compensation with that of Federal employees.
U.S. Sen. John McCain of Arizona has proposed similar measures in that chamber.
Additionally, lawmakers need to find ways to shield taxpayers from Fannie and Freddie’s shaky lending policies and questionable management practices.
The time has come to end the state of affairs at Fannie and Freddie and implement a comprehensive reform and transformation of these entities.
With responsible, common sense policies, we can phase out taxpayer support and make Fannie and Freddie live by the same rules as private lenders.
Ending bonuses for the top executives would be a strong, first step.