My colleagues Rick and Rodney have both discussed the bonuses awarded to the top bozos at Fannie Mae and Freddie Mac and the “curious case of the ass that didn’t bray in the night,” but it’s such a fascinating story that I feel almost compelled to talk about it, too. The core query of both of their articles is that why did President Obama denounce the bonuses awarded execs at bailed-out institutions such as AIG, but said nothing about the Fannie/Freddie bonuses — but his proxies defend them.
It’s a question I share.
I recall the AIG story fairly clearly. Several of the execs in one division ran up huge losses, and would have wiped out the entire company if it hadn’t been for the bailout. After the dust settled and the inept fired, AIG found it needed some very talented people to take over that division, straighten out the mess, recover as much money as they could, and shut it down.
Obviously, this assignment wouldn’t be either overly profitable or a real resume’-enhancer. And even more obviously, I wasn’t privy to the conversations that went into recruiting these new people. But from what I read and heard, it played out something like this.
“So, Bob, I have a special assignment for you. We need you to go in and clean up the mess in the Credit Swaps division. We need someone to ride herd on those idiots woulda taken down the entire company, but someone’s gotta pick up the pieces, and I think you’d be perfect for it.”
“No problem, George. I’ll get right on it after I stick my dick in the blender.”
“Come on, Bob. The company needs you.”
“And I need my reputation, George. Let’s be blunt — that’s a thankless job. Whoever takes it on will be getting all the blame for what the idiots did, and there’s no money to be made there anyway. Plus, I’ll get to go through the rest of my life with that entry on my resume’, and everyone will think I was one of those idiots. No, thanks.”
“Tell you what, Bob — we’ll set up a bonus program. Not based on profitability, of course, but on recovered assets. We’ll set up a program where you’ll get a bonus based on how much you cut the losses.”
“Getting warmer, George.”
“OK, we’ll toss in a ‘survival bonus’ — stick it out for six months, and we’ll toss in more money. And I know you didn’t cause the mess, but it’s still the company.”
“OK, George, I’ll talk about it. Lemme put this blender back in the lunch room.”
That was how the deal at AIG was spelled out — the bonuses were not for the idiots who took down the company, but the folks who came in after to clean up the mess. One of those guys was a man named Jake DeSantis, who agreed to work for $1 a year and clean up the mess, with the promise of that bonus. And the government signed off on those bonuses when they were offered. It was only after the fact, when the salvors had done their job in good faith, that there was an uproar about those bonuses and demands they be refused.
On the other hand… I don’t recall any large-scale purges at Fannie and Freddie. I don’t recall too many government officials (apart from a few cranky Republicans) in Congress demanding answers for their incompetence (I’m being generous here) in costing the taxpayers so goddamned much money.
I have a theory, of course. It’s because Obama et al see Fannie and Freddie as their people. It’s been a great dumping ground for Democratic hacks and apparatchiks for decades — Barney Frank spent several years… romantically paired… with one of their top execs. Jamie Gorelick, the “Typhoid Mary” of colossal fuck-ups, left the Clinton Justice Department (where she helped set up the “wall” that kept the FBI and CIA from sharing intelligence) to take a top job at Fannie Mae (despite no history in finance), during which time it suffered a $10 billion accounting scandal. Then, after she left, she signed on to advise Duke University when it tried to railroad its entire lacrosse team on a bogus rape charge. Gorelick’s former boss at Fannie Mae, Franklin Raines, was the one who oversaw the accounting fraud that vastly overstated Fannie’s earnings — and, by a wild coincidence, directly led to Raines collecting some very huge bonuses. Raines later became one of Candidate Obama’s top advisors. And Raines’ mentor and predecessor at Fannie Mae, Jimmy Johnson, was also a major Obama advisor and tapped to help Obama pick his running mate.
Plus, Fannie and Freddie were the engines who drove so much of the liberal/progressive social agenda. They were the ones who led (read: coerced) banks into making loans and issuing mortgages that they had little to no hope of ever recouping. To go after them would be like admitting the liberal agenda was doomed to fail.
So to expect Obama to ever denounce Fannie or Freddie would be like asking him to denounce his own pastor, or his own grandmother. It just ain’t gonna happen.
But AIG? They were in the private sector. They were greedy corporate fatcat greedheads who were only out for themselves. They weren’t high-minded civil servants out to push the liberal agenda. They not only didn’t merit defending, their contracts didn’t merit honoring, but they were damned lucky that the wise, benevolent, gracious federal government deigned to protect them from the mobs with pitchforks. Mobs that the government had helped rile up, but never mind that.
That’s how things roll in the Obama regime. If you back him, he’s got your back — as long as you aren’t a net liability.
Should the pressure on Fannie and Freddie grow too intense, I’m sure we’ll see President Obama regretfully denounce the greed and corruption that brought down such fine, noble, institutions, and how we must not let the misdeeds of a few taint all the good they did — and how we must continue their good works.
Some things are just too damned predictable.