Update: A week after Freddie announces their loss of $8 billion sister Fannie Mae comes out with a 1st quarter loss of more than $13 billion! These two companies that Barney Frank swore were financially sound have burned through another $21 billion of your money in just 3 months folks!
Its operations having lost another $8 billion in the first quarter of 2010, Freddie Mac is back at the TARP trough for more of our tax dollars. This time the tab will be $10.6 billion, but they’re bound to lose money in Q2 and for the foreseeable future, so expect them to come begging for even more very soon.
Overall this will put the federal government’s total bailout of Freddie Mac at $60 billion. Tack on another $76 billion to date for Fannie Mae’s bailout, and that’s $136 billion and counting to rescue these two organizations. Barney Frank (D-MA) must be absolutely stunned because here he is in 2003, when the Bush Administration was asking for stronger regulations, saying Fannie and Freddie would never fail, and if they did, THE GOVERNMENT WOULD NEVER BAIL THEM OUT!
Wrong again Barney!
Not many Americans noticed, but this week the House of Representatives passed legislation giving the Treasury Secretary authority to regulate excessive pay at any company that takes government bailout funds. The fact that this legislation passed on April Fool’s Day, unfortunately, doesn’t make it a joke. No, it’s very, very real.
At first blush, you may take this legislation for entirely reasonable, after all, they are getting taxpayer money and we wouldn’t want them to waste it. But, there are so many problems with this action it’s hard to know where to begin. First, and most obvious, Congress doesn’t bother to define “excessive”. Gee, does anyone think that might be problematic? What a joke this government has become! And, I’m not picking on the Democrats, both parties are absolutely worthless. Pass a law that hinges on a totally ambiguous term like “excessive compensation” without bothering to define even the general parameters of your legislative intent behind the word “excessive. Are they serious? Really?
The intent of the TARP money was to stabilize U.S. banks to prevent the economy from collapsing. To that end, it would be wise for a bank to keep the money until certain it has avoided any calamity. However, another problem with this action by the Congress is the incredible pressure it places on these financial institutions to pay the money back early, perhaps too early, in order to get out from under government control.
Many of the banks who took TARP funds are now expressing concern that with these compensation restrictions they will struggle to attract the best talent. Their competitors in the U.S. who didn’t take TARP funds and foreign banks, whose governments aren’t so short-sighted, will not face these same restrictions and will have a competitive advantage over the TARP recipients. I know what you’re thinking, “Who cares, they failed and now they’ll have to suffer the consequences”. Well, you better think again. As a taxpayer your money is on the line. Taking any action that hampers the competitiveness of the TARP recipients puts taxpayer money in further unnecessary jeopardy.
So in the end, we have yet another poorly written law by an inept Congress which will restrict the ability of the banks to hire and/or retain the appropriate talent decreasing the likelihood of eventual repayment of the people’s money. And need I remind you, this government can hardly afford to waste any more of the people’s money.