The Obama administration recently approved base salaries of $900,000, plus $3.1 million in deferred payments, and another $2 million in bonuses for the CEOs of the failed mortgage giants Fannie Mae and Freddie Mac. When asked if tax dollars should pay those bonuses, or if they should be cancelled, the chairman of the House Financial Services Committee, Rep. Barney Frank (D-Mass.), told CNSNews.com that the bonuses were “too high” but “nothing can be done now.”
The $6 million compensation packages were approved by the Treasury Department and the Federal Housing Finance Agency and made public on Dec. 24, 2009, Christmas Eve.
When CNSNews.com asked whether the bonuses should be paid or cancelled, Rep. Frank said, “No, I thought they were too high. Again, we had some language in the bill we passed that still would have been administered by them but would have put some limits on them.” Frank spoke with CNSNews.com on Wednesday at a Capitol Hill press conference on executive compensation.
Frank was referring to the bill H.R. 1586, proposed in March of 2009. It would have imposed a 90 percent tax on bonuses issued to executives at companies receiving funds from the Troubled Asset Relief Program (TARP), which is part of the $700 billion Emergency Economic Stabilization Act of 2008.
Fannie Mae and Freddie Mac received money from TARP, and the federal government seized control of the mortgage firms in September 2008.
The Senate version of the bill referenced by Rep. Frank is S. 651, which would impose an excise tax on both the employee and entity, equal to 35 percent of the bonus issued.
Frank told CNSNews.com that James Lockhart, a Bush appointee who served as the regulator for Fannie Mae and Freddie Mac while heading the Federal Housing Finance Agency under the Obama Administration, expressed opposition to H.R. 1586.
“Mr. Lockhart, who was the Bush holdover, objected and said the limits we put on were too stringent,” said Frank. “So, if the bill we had passed in 2009 – remember it was after the AIG bonuses and there was this retroactive bill – and we were then asked by the Speaker to come forward with a bill to deal with compensation for the recipients of federal funding of various kinds, including Fannie and Freddie, and we had limits which, had they become law, would not have allowed this.”
“Lockhart objected to this and I forget exactly what the numbers were,” said Frank. “We’ll get them for you. So, I think these [bonuses] were too high.”
CNSNews.com also asked Frank, “What do you think, should be done? Do you think they [the bonuses] should be cancelled?”
“Nothing can be done now,” said Frank. “The Senate should have passed the bill [H.R. 1586] that we [the House] passed. We’re the legislators. We passed a bill in the House in 2009 with regard to Fannie Mae and Freddie Mac that would have prevented these from being done.”
“Lockhart, as I said, complained about it,” said Frank. “He said he’d lose people. I would have hoped that they would have passed this. It’s not too late. The bill’s still alive. The Senate can pass those. It’s hard to do these things retroactively, but it could affect bonuses going forward.”
Frank added that he was “baffled” because every Republican voted against H.R. 1586. However, according to OpenCongress.org, 85 House Republicans voted in favor of H.R. 1586, along with 243 Democrats, while 87 House Republicans and 6 Democrats voted against it.
Frank continued: “I would hope the Senate would pass the bill we passed. Every Republican voted against it. I was somewhat baffled because this came after the objection to the amendment that Senator Dodd – I think he’d been unfairly criticized for because he gave Ken Feinberg the authority he had, in the bill, in the Economic Recovery Act, and there was objections to that – so we passed a bill perspectively, not retroactively, putting limits on the bonuses that could be given and the compensation – not just bonuses – on the compensation that could be given to all the recipients, including Fannie Mae and Freddie Mac.”
In the $787 billion stimulus package, which is separate from TARP and became law in February 2009, Dodd (D-Conn.) gave Ken Feinberg, the pay czar of the Obama administration, has the authority to limit executive salaries at companies taking TARP money.
“It passed the House, Republicans opposed it, I thought somewhat hypocritically, after complaining about this, and then it died in the Senate,” Frank said. “So, I mean, I have no authority over them. I can work to get legislation passed. I wish they’d passed the legislation then, and they can still pass it.”