Obama provides unlimited loss coverage to Fannie Mae and Freddie Mac
A Christmas Eve White House decision that nobody will notice. President Obama and his treasury secretary, Timothy Geithner, have elected to increase loss coverage for the Government Sponsored Enterprises (GSE) of Fannie Mae and Freddie Mac from $200 billion to unlimited for the next three years.
So much for transparency, but there is more! The GSEs are having a pretty good week as politicians and lobbyists are provided cover with snow storms in the nation’s capital, a huge health care debate and only the biggest holiday of the year. For those of you who may have missed it, the Associated Press reported top executives at the GSE would be paid as much as $6 million for their terrible performance in 2009. Hat tip to Sweetness & Light, with my emphasis in bold.
The top executives of Fannie Mae and Freddie Mac could get paid as much as $6 million for 2009, despite the companies’ dismal performances this year which cost taxpayers more than $100 billion.
Fannie’s CEO, Michael Williams, and Freddie CEO Charles “Ed” Haldeman Jr. each will receive $900,000 in salary, $3.1 million in deferred payments next year and another $2 million if they meet certain performance goals, according to filings with the Securities and Exchange Commission on Thursday.
The pay packages were approved by the Treasury Department and the Federal Housing Finance Agency, which regulates Fannie and Freddie.
Fannie and Freddie, which were seized by regulators in September 2008, have needed $111 billion in taxpayer money to stay afloat, one of the most expensive aftershocks of the financial crisis. News of the chief executives’ pay could spark new criticism about the government’s numerous bailouts.
So after that story quietly dropped on Dec. 24, the Obama administration must have figured it was a good time to slide in the news that the federal government was now willing to cover all GSE losses for the next three years. Hat tip to Ed Morrissey over at Hot Air.
The original story over at Wall Street Journal written by By James Hagerty and Jessica Holzer today has good detail about both stories mentioned above.
The Treasury announced Thursday it was removing the caps that limited the amount of available capital to the companies to $200 billion each.
Unlimited access to bailout funds through 2012 was “necessary for preserving the continued strength and stability of the mortgage market,” the Treasury said. Fannie and Freddie purchase or guarantee most U.S. home mortgages and have run up huge losses stemming from the worst wave of defaults since the 1930s.
“The timing of this executive order giving Fannie and Freddie a blank check is no coincidence,” said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. He said the Christmas Eve announcement was designed “to prevent the general public from taking note.”
Treasury officials couldn’t be reached for comment Friday.
Others writing include Volokh Conspiracy and Gateway Pundit, who adds…
So, will Obama lecture these execs in his weekly YouTube address?
The #1 thing to watch out for is banks re classifying default commercial properties as residential mortgages. Strip malls may open a homeless shelter in a vacant lot to qualify as "housing" so banks can dump a large default on the tax payer. This news shows weakness in the banking sector from mortgage defaults is stronger than DC anticipated, which is what happens when unemployment surges to 10%. I would rather the US tax payer honor the FDIC guarantee of deposits on failed banks, and close those operations, than these sleezy back door bail outs. Looks like we are in for another 1.5 + TRILLION deficit in 2010.