Remember when Barack Obama was upset at the bonuses paid to AIG execs?

November 16, 2011

I mean, he was the picture of righteous indignation:

President Obama said Monday he will attempt to block bonuses to executives at ailing insurance giant AIG, payments he described as an “outrage.”

“This is a corporation that finds itself in financial distress due to recklessness and greed,” Obama told politicians and reporters in the Roosevelt Room of the White House, where he and Treasury Secretary Tim Geithner were unveiling a package to aid the nation’s small businesses.

The president expressed dismay and anger over the bonuses to executives at AIG, which has received $173 billion in U.S. government bailouts over the past six months.

“Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?”Obama was referring to the bonuses paid to traders in AIG’s financial products division, the tiny group of people who crafted complicated deals that wound up shaking the world’s economic foundations.

But when it comes to the millions of dollars in compensation, regular and bonus, paid to executives of Fannie Mae and Freddie Mac, the two Government-Sponsored Enterprises (GSEs) that were at the very center of the sub-prime mortgage-bundling that poisoned the financial system and took down companies such as AIG, Obama’s outrage is… strangely mute:

That’s from the House Oversight Committee, chaired by Rep. Darrell Issa (R-CA), who must really be Obama’s favorite congressman right about now. The committee is holding hearings today on the compensation scheme at the two GSEs and have issued a staff report in advance. Here’s an excerpt:

When the bubble burst in 2007, Fannie and Freddie began to lose billions of dollars of investments in mortgage-backed securities (MBS) guarantees. In September 2008, the Federal Housing Finance Agency (FHFA) took Fannie and Freddie into conservatorship as a result of mounting losses stemming from the financial crisis.The Enterprises became de facto government entities, funded by preferred stock purchase agreements from the Department of the Treasury (Treasury). Today, the Enterprises remain a multi-billion-dollar drag on the federal government’s finances. Since they entered conservatorship, Treasury has provided $169 billion to Fannie and Freddie – and the payouts are scheduled to continue with no end in sight. According to recent FHFA projections, by the end of 2014, Treasury assistance to the Enterprises will total $220 billion to $311 billion.

Since the Enterprises have become government-funded entities, lavish payment packages have been doled out to their senior executives, and taxpayers have been footing the bill. In 2009and 2010, the Enterprises’ top six officers were given a total of more than $35 million in compensation. Of that amount, a total of $17 million in compensation was given to the CEOs of the Enterprises. Additional bonus installments for 2010 may still be forthcoming, and the two CEOs stand to make a total of $12 million in 2011. In addition, an executive has been awarded a substantial signing bonus – $1.7 million – upon joining the Fannie Mae. As these figures indicate, senior executives at Fannie Mae and Freddie Mac have become the highest compensated workers on the federal payroll – making as much as eight times more than the President of the United States. The executives even make more than their conservator, FHFA Acting Director Edward J. DeMarco.

(Emphasis added)

The outrageousness here is almost beyond measure. Again, these agencies were at the heart of the financial crackup. When the Clinton administration altered the CRA to pressure banks into making questionable loans via then-HUD Secretary and now NY Governor Andrew Cuomo, the two GSEs used the bundling and government-backed resale of these securities as a sugarcoating for the bitter pill they were making the banks swallow. Democrats desperately defended this practice against three different efforts at reform under the Bush administration.

And yet now, instead of being spun-off as wholly private enterprises or just shut down, and while they are still being bailed out by billions in taxpayer dollars, their executives are being rewarded with tens of millions in salary and bonuses — all funded by the taxpayer.

And Barack Obama is silent, his outrage nowhere to be seen.

Ed Morrissey is right: the reason is simple. Obama and the (Social) Democrats are quiet on this because they want to keep Fannie and Freddie around so they can use them as instruments for progressive social engineering — such as making even more sub-prime loans, which caused the problem in the first place.

But he’s only partly right; there’s another reason. For Obama to get angry over these bonuses and attack the GSEs would be to admit that government and Democratic Party policies, implemented in the 90s in concert with ACORN and other Socialist advocacy groups, were as much to blame for what has happened as the financial companies he loves to demonize — if not more so. And Barack Obama cannot do that.

Hence, the silence. A silence that speaks volumes.

RELATED: For an excellent book on the causes of the financial disaster, see Reckless Endangerment, by NY Times reporter Gretchen Morgenson and writer Joshua Rosner.

(Crossposted at Sister Toldjah)


You think the Greek and Irish crises were bad?

November 29, 2010

Wait until Spain’s economy goes into meltdown. That could be the blow that triggers the end of the Euro:

Economists say that given Spain’s large deficits and poor long-term growth prospects, any failure to achieve government targets for cutting the deficit, and/or any rise in Spanish bank risk, could cause a market panic and turn Spain into the next victim of market contagion.

A financial meltdown in Spain would have repercussions far beyond the Iberian Peninsula. For starters, many analysts believe a debt crisis in Spain would trigger a similar meltdown in Italy, which is the fourth-largest economy in the eurozone, and which suffers from many of the same financial woes that are plaguing Spain. What’s more, Italy has one of the world’s highest public debts, expected to reach a staggering 118 percent of GDP in 2010.

Given the relative size of the Spanish economy, financial turmoil in Spain would likely also doom the single European currency, and with that more than 60 years of European dreams of transforming the continent into a superpower-like United States of Europe capable of counter-balancing the United States of America on the global stage.

Germany, which arguably has more invested in (and also has benefited more from) the European Union than any other country in Europe, is alarmed by the potential unraveling of the euro. German Chancellor Angela Merkel says the prospect of serial European bailouts is “exceptionally serious,” and that while she does not want to “paint a dramatic picture,” it would have been hard a year ago to “imagine the debate” now taking place in Europe.

I know about as much about government finances as I do Buddhist theology, but, Chancellor Merkel’s desire to save the Euro aside, it would not surprise me to see, in a crisis created first by a Spanish and then an Italian crash, Germany withdraw from the Euro in order to protect its own economy. Germans already hated the bailout given to the profligate Greeks, and I imagine there’s grumbling about the deal given the Irish. Just wait until they’re presented with a bill from Madrid and Rome. I could well imagine even the Chancellor throwing up her hands and shouting Wir haben genug!

In any event, do read the whole article. It’s a good overview of both the problems Spain faces and the limited options it has to address those problems, given its entitlement-addicted people, inflexible labor market, and the power ceded to the European Central Bank.

Question: If the Euro zone does collapse like the wet paper bag it is, does that kill the European Union, too? In the abstract, the death of that burgeoning bureaucratic dictatorship would seem to me a desirable thing. But it would be potentially very, very messy. As in “We’re angry, resentful, feeling hyper-nationalistic, and we don’t like you” messy.

 


The shamelessness of Barney Frank

August 24, 2010

Remember when the financial crisis hit and the Democrats, especially Barney Frank, said they couldn’t be held responsible for the poison mortgages that triggered the whole mess? It was the Republicans’ fault, especially that evil and stupid George W. Bush, but never the Democrats. Never, in spite of passing Community Redevelopment Act in the late 70s that was later used, under Bill Clinton and his Housing Secretary, Andrew Cuomo, to force banks into easy-lending policies to home-buyers who weren’t otherwise qualified. The Democrats had no responsibility, according to Frank and others, even though they then pressed for Fannie Mae and Freddie Mac to guarantee these bad mortgages, buy them up, and sell them as (lousy) bundled securities on the open market and thus poisoning the financial system. The Democrats had no responsibility, even though they blocked three different Republican attempts to reform the two agencies after 2000. Instead, the Democrats, lead by Frank and Senator Chris Dodd (D-Countrywide), defended Fannie and Freddie tooth and claw and even cried racism at any attempt to tighten up lending requirements.

An educational video:

All this lead directly to the September, 2008, financial crisis, but none of it was the Democrats’ responsibility, according to Barney Frank.

That was then, this is now:

For years, Frank was a staunch supporter of Fannie Mae and Freddie Mac, the giant government housing agencies that played such an enormous role in the financial meltdown that thrust the economy into the Great Recession. But in a recent CNBC interview, Frank told me that he was ready to say goodbye to Fannie and Freddie.

“I hope by next year we’ll have abolished Fannie and Freddie,” he said. Remarkable. And he went on to say that “it was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.” He then added, “I had been too sanguine about Fannie and Freddie.”

When I asked Frank about a long-term phase-out plan that would shrink Fannie and Freddie portfolios and mortgage-purchase limits, and merge the agencies into the Federal Housing Administration (FHA) for a separate low-income program that would get government out of middle-income housing subsidies, he replied: “Larry, that, I think, is exactly what we should be doing.”

This is like the guy who was warned not to drink and drive killing someone in an accident and then saying “I made a mistake in judgment.” It in no way relieves our imaginary drunk driver nor Barney Frank of the responsibility for the tremendous harm they’ve done. With a beautifully impersonal “it was a mistake,” he hides the fact that he, himself, was one of the powers making that mistake and turning it critical.

And this fat, incompetent clown wants more power? He expects to be reelected? “Shameless” does not begin to describe this slug.

Please, if this November does see a Republican wave, let Bawney Fwank be one of the ones drowned in it.

You can help make this so by donating to his opponent, Sean Bielat.

(Crossposted at Sister Toldjah)


Klavan on the culture: Financial Crisis 101

May 7, 2010

In today’s installment, author Andrew Klavan uses free government-provided humor to explain the US financial crisis:

And for a less funny, more angry take…


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