More Indefensible Executive Bonuses

While I am certain that the root cause of the current Great Recession was the vast gap of wealth and income between the richest 1-2% of Americans and the bottom 98-99% of Americans, that was not the trigger that started the economy's downhill slide. The trigger was the financial mismanagement on Wall Street -- especially concerning the bundling and sale of unsustainable home mortgages.

The Republicans in Congress have been trying to protect their buddies (and campaign contributors) in the giant Wall Street Banks by placing all of the blame for the economy's crash on Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). That's just hogwash. The giant Wall Street banks played a big part in cratering the U.S. economy, and they should have been held responsible for it (but sadly, they weren't).

But while Fannie Mae and Freddie Mac weren't the sole causes of the economy's crash, neither were they innocent bystanders. They also played a big role in the sale of homes to people who clearly could not afford them (and the bundling and resale of those mortgages), and need to shoulder their own part of the blame for throwing this nation into recession.


We already knew that the giant Wall Street banks, after taking billions in taxpayer-funded bailouts, went right back to doing business the same old way and gave out huge bonuses to the executives responsible for creating the economic mess in the first place. Now we learn that Fannie Mae and Freddie Mac have done the same thing. They have passed out millions of dollars of bonuses to their executives -- about $12.8 million to be exact.

The acting director, Edward DeMarco, of the Federal Housing Finance Agency (the agency that took over conservatorship of Fannie Mae and Freddie Mac in 2008 after they got in financial trouble) is now trying to defend the awarding of those millions of dollars in executive bonuses. He said it was the only way to keep talented executives working for the companies.

Frankly, I have to wonder just how "talented" those executives are. This month alone, Fannie Mae has asked for $7.8 billion and Freddie Mac has asked to $6 billion to cover their losses. To date they have already required $170 billion in taxpayer bailouts to stay afloat, and it is expected they will need another $50 billion by the end of 2014. That's a total of $220 billion of taxpayer money they require to stay in business (and we can only hope that'll be all that's needed).

I know that the main purpose of these two federally-created companies is to make more money available to the market so more Americans will be able to buy their own homes -- a laudable goal. And if they had just broken even, I could see them giving out small bonuses. But they didn't -- they have rung up $170 billion to $220 billion in losses that the taxpayers must cover. And personally, I think any company that receives billions of dollars in taxpayer bailouts shouldn't be passing out bonuses -- not even small bonuses (especially in light of all the job losses and hurt this has spread to the denizens of Main Street).

The fact is that actions of Fannie Mae and Freddie Mac, along with those of the giant Wall Street banks, have resulted in a busted housing market, with millions of homes being foreclosed and millions more homeowners being "upside-down" on their home loans. They simply have earned any bonuses.