Congress Says ‘No’ to Fannie Mae/Freddie Mac CEO Pay Hike; Misses Big Picture

fannie-mae-and-freddie-macIf there is an issue that has united popular indignation, Left and Right alike, executive compensation surely ranks near or at the top.  But the bipartisan opposition to recent pay increases for the CEOs of mortgage conduits Fannie Mae and Freddie Mac, while highly understandable, misses the larger point.  Several months ago, these companies, which account for nearly half the outstanding home mortgage debt in the U.S. and which since 2008 have been wards of the government, announced plans to raise annual CEO pay from $600,000 to $4 million.  Their overseer, the Federal Housing Finance Agency, approved the hikes.  In response, Congress overwhelmingly has passed (or is on the verge of passing) bills to roll them back.  Lawmakers would do better to allow the firms to operate freely and without subsidies.

National Legal and Policy Center has visited the travails of these two companies many times over the last …

GM Misses Earnings – Burns over $3 Billion in First Quarter

It appears that General Motors is trying to remedy one of the latest criticisms against them. That criticism is that the company has way too large a “cash hoard” and most recently came from former Obama Auto Task Force member turned shareholder activist, Harry Wilson. Well Harry, be at ease; GM has managed to reduce that so-called hoard by over $3 billion in just three months as first quarter earnings flopped on Wall Street.

An analysis of GM’s earnings data release shows that cash and cash equivalents plunged from $19 billion to $15.8 billion. Marketable securities’ value also fell from $9.2 billion to $8.4 billion. Unfortunately for GM optimists who might want to point to GM’s share buy-back as the reason for the cash burn, it turns out that GM only used $400 million in cash during the quarter to repurchase 10 million shares. Despite that buyback, the number …

Did GM Bailout Cost Lives?

The death toll for General Motors’ faulty ignition switch victims continues to rise with the last reported number being 42. There has been speculation that the death count is significantly higher, as safety advocate Clarence Ditlow has written to GM to request an expansion of efforts to uncover victims of accidents resulting from defective GM vehicles.

GM has known about the ignition switch defect for years and failed to recall the deadly vehicles for almost five years after the Obama Administration took over the company in June of 2009. President Obama’s Auto Task Force guided the company through a manipulated bankruptcy process that favored political allies like the UAW over other creditors as new management and board members were appointed by the Administration. We now must question the perceived “success” of the GM bailout and ask if a conventional bankruptcy process could have saved some of the lives that were …

Another GM Recall Bombshell Raises More Questions

Brooke's carThe evidence continues to mount that General Motors has been less than transparent, if not outright culpable, regarding its ignition switch recall fiasco. As the death toll mounts (from the original 13 casualties reported by GM to the just revised 32 deaths) for victims involved in crashes of GM vehicles with defective ignition switches, new evidence has emerged that GM actually ordered replacement parts for the defective switches a full two months before they even reported a problem.

A Wall Street Journal article published on Sunday unveiled the damning evidence that GM placed an order for half a million replacement parts for defective ignition switches in mid-December of 2013. GM’s timeline of events points to February of 2014 as the time when they decided on recalling the vehicles. Mary Barra has stated that she was not aware of the issue until around that time, when GM notified the National Highway …

SIGTARP: Excessive Pay at Bailed-Out GM

GM money bagsA special inspector general report on compensation for executives at General Motors and Ally Financial blasts the Treasury Department for allowing excessive pay at the companies as taxpayers lost billions of dollars on the auto bailouts. The watchdog group issuing the report monitors the Troubled Asset Relief Program (TARP), which was set up to save financial corporations deemed “too big to fail” due to systemic risk to America’s financial system. The program was expanded to allow for the bailing out of the auto industry, despite the questionable use of funds specifically designated for financial institutions.

A NY Times piece states that the report criticizes the Treasury Department for loosening restrictions on TARP program pay limitations as follows:

Top executives at General Motors and Ally Financial, both of which received bailouts from the United States Treasury Department in 2009, were paid excessively even as taxpayers lost money, according to a special

Obama Silent on Chrysler Tax Inversion Deal

Obama at ChryslerIt’s official. Chrysler has now completely merged with Italian auto maker, Fiat. It had taken a bit over five years for Fiat to gain total control of the bailed out, once-American Chrysler Corporation. Back in June of 2009, President Obama gifted (payment was made in the form of “technology”) an initial 20% stake in Chrysler to Fiat as part of his orchestrated auto bailout process. Fiat parlayed that into full ownership and is now showing its gratitude to the American taxpayers who helped fund the deal by relocating Chrysler’s headquarters to London; a move which will lessen the company’s corporate tax rate.

While the Obama Administration has been quite vocal in condemning such deals (known as tax inversion deals) which lower corporations’ US tax bills, not much has been said when the companies involved are linked to cronies of the Administration. Obama friend, Warren Buffett, financed …

Fannie Mae/Freddie Mac Shareholders Publicize Suit against Federal Taking of Assets

Fannie Mae and Freddie MacFannie Mae and Freddie Mac formally are known as Government-Sponsored Enterprises, or GSEs. These days the “S” might stand for “stolen.” A group of their shareholders are arguing as much in federal court in Perry Capital v. Lew. The U.S. Treasury Department, claim the plaintiffs, overstepped its authority by impounding profits in perpetuity through its “sweep” rule of 2012. On Wednesday, February 5, the group, Shareholder Respect, held a conference in Washington, D.C. to highlight its view that the rule violates the terms of the temporary conservatorship under which Fannie Mae and Freddie Mac have been forced to operate since 2008.  Ralph Nader, through his group, Public Citizen, organized the event. Speakers included the shareholders’ lawyer, former Solicitor General Theodore Olson. Anyone concerned over the future of property rights in this country should be following this case.

The Washington, D.C.-based Federal National Mortgage Association (“Fannie Mae”) and the …

GM’s Balance Sheet Not as Healthy as it Looks

GM UAW logosOne of the major architects of the General Motors bankruptcy process, Harry Wilson, recently gave a very optimistic outlook for GM future share price. Mr. Wilson was a member of President Obama’s Auto Task Force, and was an instrumental player in seeing that UAW interests were put ahead of other creditors, like old GM bondholders.

Automotive News now reports that Mr. Wilson feels that GM may be a target for activists because of their “huge” cash hoard. According to the piece:

“Any company that isn’t efficient about capital allocation is a target for activists,” said Wilson, who is now a restructuring adviser at Maeva Group LLC in Westchester, N.Y. “GM has a huge cash hoard and they are generating lots more cash each year, so they need to be thoughtful about that.”

The problem with Mr. Wilson’s statement regarding GM’s balance sheet improving is that it just isn’t true. The …

Taxpayers Tally Losses as Treasury Exits GM Stake

money down the drainIt appears the time has finally come for the Obama Administration to end taxpayers’ forced investment in General Motors. Reports continue to roll in that Treasury is expected to sell its remaining stake by year-end. Of course, the news will be trumpeted as a great success by those responsible for the heist that cost taxpayers (along with creditors and shareholders of old GM) billions of dollars.

The final figures confirming how taxpayers fared will have to wait for the closing tally, but the estimated loss to those who footed the GM bailout bill is in the $10 billion range. A full retrospective view will reveal that the losses go far beyond that monetary sum. Worse yet, the money was spent to reward political allies that would, in return for the payoff, come out in force to secure President Obama’s reelection.

The hyperbolic spin by General Motors and the Obama …

SIGTARP Report – Obama Admin Lied about GM Bankruptcy Process

For years the Obama Administration maintained that they had no significant involvement in the day to day operations at General Motors as the company was guided through a taxpayer-funded bankruptcy process. A report from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) now sheds light on the process and confirms that the Administration did, in fact, drive decisions at GM. One such decision saw GM provide taxpayer funds to “top-off” pensions for politically-favored UAW retirees at Delphi while non-union retirees lost the majority of their benefits. Treasury officials previously denied any involvement in the actions.

The non-union retirees at Delphi have been trying to get their story heard for years. The Chair for the Delphi Salaried Retirees, Dennis Black, offered the following statement regarding the SIGTARP report, “SIGTARP’s finding that Treasury was greatly involved in the involuntary termination of our pension plan legitimizes our request that Treasury …

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