Claims and Bad Faith Law Blog

Fiduciary Duties for Fannie, Freddie Failures?

     The fired CEOs of Fannie Mae and Freddie Mac will not be receiving the full amounts of their  multi-million dollar separation payments, it is reported by Zachary A. Goldfarb, "No 'Golden Parachutes' for Fannie, Freddie's Ex-Chiefs" (Washington Post Online, Monday, September 15, 2008).  Both Fannie Mae and Freddie Mac recently agreed to revising (upward) their respective CEOs' separation provisions, also known as golden parachutes because they lower only one person for a golden landing while doing absolutely no good for anyone else.  However, not recently enough.

    Since the Federal Taxpayer Takeover of both Fannie Mae and Freddie Mac by agents of the current Federal Government, it has been reported that the Federal agents are talking about not paying the full amount of these golden parachute provisions, now funded by you and by me, dear Federal Taxpayer.  Id.

    Later newspaper articles report that the fired CEOs will only lose about 1/2 of their separation bonuses, the remaining millions of dollars to be paid by you and by me, the Federal Taxpayers.  Zachary Goldfarb, "Fannie, Freddie's Former CEOs to Lose $12.6 Million in Severance Pay" (Washington Post Online, Tuesday, September 16, 2008). 

    The agenda really begins with how much the fired CEOs, on whose watch Fannie and Freddie failed, are going to pay back.  To talk about not paying these people the "full" or "part" of the amount of their separation bonuses is insulting if not downright farcical.

    It remains to be seen whether the current agents of the Federal Taxpayers have the capacity either to deny these people anything, or to recoup the gains these people received while failing so miserably that the same Federal Taxpayers are suddenly saddled with responsbillity for the failures of these people.  See Binyamin Appelbaum, Carol D. Leonnig and David S. Hilzenrath, "How Washington Failed to Rein in Fannie, Freddie/As Profits Grew, Firms Used Their Power to Mask Peril" (Washington Post Online, Sunday, September 14, 2008).

    More on this story is posted on Insurance Claims and Issues Web Log, available at www.insuranceclaimsissues.typepad.com and also on the web site of the American Bar Association and linked here.

Please Read The Disclaimer.

Federal Taxpayer Takeover Looms of Fiduciary Fatalities Fannie and Freddie.

    Unknown, unnamed "officials" are critical of executives in charge of Freddie Mac and Fannie Mae.  It is reported on the weekend this post is written, that Federal Taxpayers will soon be paying for a Federal takeover of the two "mortgage giants".  Stephen Labaton and Andrew Ross Sorkin, "U.S. Rescue Seen at Hand for Two Mortgage Giants" p. A1, col. 5 (New York Times Nat'l Ed., Saturday, September 2, 2008).

    Reportedly, as part of the Federal Taxpayer Takeover the executives and the boards of both Freddie Mac and Fannie Mae will leave.  It appears that they will be leaving with no noticeable effect on their own financial portfolios.

    Investors, however, will not be so lucky.  Shareholders of the quasi-governmental corporations "would be virtually wiped out".  Id.

    Although the linked newspaper report does not link the anonymous officials' "criticism" with the executives' compensation, it does repeat previous reports of "huge compensation packages" for certain executives of Fannie Mae and Freddie Mac who were reportedly in charge of the companies' operations which have led to the Federal Taxpayer Takeover.  In particular, the CEO of Freddie Mac allegedly was paid over $38,000,000.00 since 2003, id., which is some $7.6 Million per year on average for each of the past 5 years.

    Rather than words of criticism in private, perhaps some examination could be made of the question of recovering some of the executive compensation for the shareholders -- or not say anything at all if nothing public is to be done.

Please Read The Disclaimer.