Friday, December 25, 2009

Rewarding Incompetence

Fannie Mae & Freddie Mac executives to receive millions in bonuses!

Barney Frank – “Maybe its time to fire some people” (in response to AIG bonuses)

March 16, 2009

“Rep. Barney Frank charged today that a decision by financially-strapped insurance giant AIG to pay millions in executive bonuses amounts to "rewarding incompetence."

Echoing outrage expressed on both sides of the political aisle in the wake of revelations that American International Group will pay roughly $165 million in bonuses; Frank said he believes it’s time to shake up the company.” – Boston Herald

Andrew Cuomo – March 17, 2009

“New York Attorney General Andrew Cuomo on Tuesday urged Chairman of the House Financial Services Committee Barney Frank, D-Mass., to address executive bonus issues uncovered from American International Group Inc. AIG Chief Executive Edward Liddy is scheduled to appear before Frank's committee on Wednesday.

Cuomo said AIG has refused to name who received more than $160 million in retention payments at the firm's troubled financial products unit and on Monday subpoenaed the information. Cuomo said the top recipient at AIG received more than $6.4 million, the top 7 recipients received more than $4 million each, and that 73 employees got bonuses of $1 million or more” – Market Watch

In order to compare apples to apples between Fannie Mae/Freddie Mac to AIG on the day Frank (3/16/09) called AIG incompetent the stock price was $30.12 per share. On the day that the Treasury Department extended (for 3 years) as much cash as Fannie and Freddie will need, their stock prices were $1.05 per share and $1.27 per share respectively.

Then, in the Democrats famous way of “flip flops”, Chris Dodd (who was for the bonuses before he was against them) said the following:

“Senator Chris Dodd (D-Conn.) on Monday night floated the idea of taxing American International Group (AIG: 0.9768, 0.1967, 25.21%) bonus recipients so the government could recoup the $450 million the company is paying to employees in its financial products unit.”
Within hours, the idea spread to both houses of Congress, with lawmakers proposing an AIG bonus tax.

While the Senate constructed the $787 billion stimulus last month, Dodd unexpectedly added an executive-compensation restriction to the bill. That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009,” which exempts the very AIG bonuses Dodd and others are seeking to tax. The amendment is in the final version and is law.

Also, Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to"

Days later, Barney Frank, acting as “Democrat thug” demanded the names of the executives that were to receive the bonuses at AIG when he opened the AIG hearings with the following:

“We will be asking for the names,” Frank said at the beginning of a hearing at which AIG Chairman Edward Liddy was called to testify. “If Mr. Liddy declines to give us the names, then I will convene the committee to vote a subpoena for the names. So we do intend to use our power to get the names of the people here.”

Senate Majority Leader Harry Reid and other Democrats said on Tuesday that Congress will force executives of American International Group to pay back at least some of the bonus money, but it's not clear how that could happen.

Frank on Wedneday complained that the AIG contract “appears to have been signed in contemplation of serious losses.” He noted that the bonuses were to be awarded whether the firm made money or lost money.

“As for retention – no I do not think these are the people you want to retain.” Frank said. It would be better for people who did not make the mistakes undo them."

AIG head testifies that divulging names will endanger them further as “death threats” have already been received.

“Liddy said Wednesday he has asked most recipients of more than $160 million in bonuses to repay at least half the money. But he warned that staff may resign when they return the cash, making it more difficult to unwind AIG's remaining $1.6 trillion book of derivatives.
He also said the identities of the bonus recipients should not be made public, because that could put employees in further danger. He read one of the threats, which said AIG staff and their families should be executed "with piano wire."

The Usual suspects that foment violence:

Death threats fueled by Democrat demonization of Insurance industry as well as excessive executive bonuses in private sector. This anger that was fabricated by democrats and fanned by MSM and perpetuated by ACORN:

The house tour in Fairfield County was organized by the Connecticut Working Families Party, a coalition of union and community groups. The county had a population in 2007 of 910,003 and a median income of $79,326, according to the Connecticut Economic Resource Center, Inc. It’s located about 60 miles north of AIG’s headquarters in lower Manhattan. In addition to the protesters on the bus, another 20 demonstrators along with more print and TV reporters, cameramen and photographers trailed in a caravan of cars.

Where is the outrage about incompetence being rewarded now? Where is the outrage and busses lining up to travel to Fannie and Freddie Executive homes? Where are the death threats about “stealing taxpayer money” from the fringe elements?

On November 12, 2009 we started to learn that Fannie and Freddie were going to have to seek another bailout because the 2009 “third quarter” losses were massive (even after receiving so much money in bailout funds).

The Money Pit:

The Feds are aware that this government program continues to bleed and expects it to into the future, yet they cannot comprehend that it is a “failed business entity”.

“The latest report shows a Third quarter loss of $18.9 billion, representing a dramatic increase from the $14.8 billion lost in the previous quarter of 2009. These disappointing figures brought their total losses since September 2008 to $111 billion.

Fannie Mae recognizes that their commitment to the Making Homes Affordable program is going to continue to be a source of significant losses and reduce the net worth of the enterprise. They hope to see longer term financial benefits for the housing market and individual credit worthiness if this program succeeds in reducing the numbers of foreclosures. The anticipated improvements are however contingent on a wider easing of the financial crisis, especially a reversal in rising unemployment.”

In December, the NY Times reported that Barney Frank demanded the $4.4 million dollar “retention bonuses” be rescinded and was overruled by the Financial Regulator which is at least a little admirable that he is somewhat consistent. But I draw the line here because he did not drag the top Executive before his committee and demand to know the addresses of the other executives that he did with AIG. His criticism was merely lip service to go on record because he has the power, through Congress to tax their bonuses at the 90% rate to recoup those bonuses (as Congress threatened with AIG).

Per the NYT:

Last month, Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, demanded that the companies rescind $4.4 million in retention bonuses paid to Fannie’s four top executives last year. Such bonuses are often offered to keep executives from leaving a company.

“I’m skeptical that these people have job offers to go elsewhere,” Mr. Frank said in an interview. “And in this economy, I don’t think it would be hard to find talented replacements for anyone who leaves.”

Mr. Lockhart, the companies’ regulator, rebuffed Mr. Frank’s suggestion.

The Democrats go after Public Companies with a vengeance and give the pass to their favorite corrupt and worthless organization. It is time that the “tea party” express fill busses and visit some homes, what do you think?

The Socialists are attempting to do the same with Healthcare Insurers as they did with this federally backed program that is an utter failure. They will do the same to this industry as they have shown to have done with the Financial Housing Industry.

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