Dean Baker: Rescuing Fannie and Freddie: Let's Draw Blood

[marmar]

from TPM Muckraker:



Rescuing Fannie and Freddie: Let's Draw Blood
By Dean Baker - July 12, 2008, 6:08PM



Fannie Mae and Freddie Mac are going under and the economists are surprised. Those of us who actually pay attention to the economy (instead of just getting paid to be "economists") knew that the crash of the housing bubble would put these mortgage giants in danger. (I'm on record from back in October, 2002.)

Okay, we all should know that economists generally don't have a clue, but what should we do about the impending collapse of Freddie Mac and Fannie Mae? Well, it would be a devastating blow to the housing market to lose Fannie and Freddie even in the best of times, but it would really be a disaster to let them collapse in the middle of the housing meltdown, at a point where they directly or indirectly finance 70 percent of new mortgages.

So, we have to keep them going, but we also have to make sure the clowns that wrecked these huge companies feel the pain.

The recipe is simple. We impose some serious compensation limits as a condition of getting taxpayer dollars. How about $2 million a year? Yes, that is $2 million a year counting everything, salary, stock options, bonuses, use of corporate jets etc. (And if they lie, they go to jail for the rest of their lives - no more jokes from incompetent rich people.)

Is $2 million too low, will we lose top executives? First, who cares? These are people who were too dumb to see the largest housing bubble in the history of the world. If we lose them is that going to be bad news for Fannie and Freddie's future?

The other question is what alternative employment options do these people have? Are they going to make more money bussing tables and cleaning toilets? That's not very likely. .....(more)

The complete piece is at: http://tpmcafe.talkingpointsmemo.com/2008/07/12/rescuing_fannie_and_freddie_le/

[NC_Nurse]

1. I wholeheartedly agree, but I have a hard time seeing anything even close to

that happening. Who decides the pay for these a'holes? Other rich a'holes, that's who.
The public isn't going to have any say in what, if any, penalties are born by these folks.

Sad, but true. If they get fired, they'll get one of those fabulous compensation packages
to leave too. Disgusting.

[rateyes]

2. He calls $2 million a year drawing blood?

Fire the bastards. Make them clean toilets or bus tables. It's the just thing to do.

[JDPriestly]

3. My neighbor across the street and I saw this coming.

All of the sudden, the "value" of the houses in our lower middle class L.A. neighborhood jumped way up and out of proportion to the wages and salaries of the people who live in our neighborhood. We talked about it many times, asking each other, how in the world people are paying for houses like ours at these prices considering wages have not gone up.

The CEOs did not see what we saw because the CEOs were getting astronomical raises. Thanks to their outrageous pay packages, the CEOs had no clue as to what was going on in average American homes.

So, yes, the solution here is to pay the CEOs less. It will not only save money for the companies and provide a larger share of future profits (if there ever are any) for shareholders, but also make the CEOs more realistic about what is going on in the real economy, the economy ordinary Americans live and work and buy things in.

American CEOs have a "Let them eat cake" mentality. Lower salaries would get their feet back on the ground.