One of the more entrenched principles in business is "pay for performance," the rewarding of executives with raises, bonuses and other forms of compensation if they meet or exceed expectations. Fannie Mae and Freddie Mac, now wards of the federal government, are negations of that principle. The troubled secondary mortgage lending giants, already having received more than $110 billion in federal subsidies since the fall of 2008, are set for another major feed at the public trough. On December 24, the U.S. Treasury Department, facing a December 31 deadline, approved a no-limit hike in the publicly-traded companies' combined $400 billion credit line. Were that not enough, regulators approved an annual compensation package of up to $6 million for each chief executive officer. Welcome to pay for performance, Obama-style - not that the Bush version was a bargain.
"It's time to apply the same rules from top to bottom: No bailouts, no handouts and no cop-outs. An America built to last insists on responsibility from everybody." Thus President Obama laid down the gauntlet in his recent State of the Union address. Yet he remains committed to subsidizing industries. And mortgage lending is high on his priority list. In his speech, he announced a plan that "gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates...A small fee on the largest institutions will ensure that it won't add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust."
