"You do not imagine, I hope, that we pigs are doing this in a spirit of selfishness and privilege?"
"WASHINGTON (AP) -- Mortgage finance giants Fannie Mae and Freddie Mac plan to pay more than $210 million in bonuses through next year to give workers the incentive to stay in their jobs at the government-controlled companies.Is Mr. Lockhart talking about something like this?
. . .
The companies' federal regulator, James Lockhart of the Federal Housing Finance Agency, defended the bonuses in a March 27 letter to Grassley, noting that the collapse of the company's stock prices "destroyed years of savings for many" workers. The companies' stocks now trade below $1, down from more than $60 in fall 2007".
Oops! Wrong chart.
"Lockhart denied a request Grassley made last month to release names of employees receiving at least $100,000 in bonuses, citing 'personal privacy and safety reasons'."No bus trips for us, then.
"But many lawmakers have little sympathy for that argument amid a public outcry over roughly $165 million in bonuses paid out last month by bailed-out insurance giant American International Group".
17 comments:
Harriet, you are being way too generous in using the logarithmic-formatted chart (i.e., the one with the uneven price scale on the Y axis). Here, use this linear chart instead to show the real picture of what happened:
http://tinyurl.com/dmal5a
JF,
Thanks!
Two questions:
1. Why is a company that has seen such a colossal failure in oversight worried about "retaining" those that oversaw the failure?
2. Where do the companies think these "talented people" are going to go in this economy such that they need an incentive to stay?
My $0.02
best people from any big company definitely can go somewhere. they lost all the long-term incentives to stay that they had before (restricted stock and stock options). it is dubious, that their reputation will improve much from staying now. and best people will leave first, not waiting for economy and job market to get even worse.
another thing is how to find a fair way to separate talented people with opportunities from others.
if the government plans to use these companies somehow, they will prefer to keep qualified people there.
"best people from any big company definitely can go somewhere."
Good. Let em leave. They can loan money somewhere else. Where are they going to go? Goldman Sachs? Whose going to trade with GS? AIG? What a load a BS.
Or maybe they'll go to a local Washington DC firm like Friedman, Billings Ramsey. err... Except that FBR is still laying people off:
http://voices.washingtonpost.com/washbizblog/2008/12/more_layoffs_at_fbr_capital_ma.html
Unfortunately, the vast majority of people who work at these companies aren't in a position to change the business focus of the organization. They have a job that is defined by their boss and if they do a "good job" there is a promise of compensation. Think of how many middle managers made a choice to work long hours away from their families with the hope they could send their little Johnny to the Ivy League only to later find out that those 70 hour weeks were for not because the CEO, who walked with his parachute, made some bad decisions.
"They have a job that is defined by their boss and if they do a "good job" there is a promise of compensation. "
it is called a salary.
bonuses are tied to corporate and individual
performance.
and sorry life made other plans, a lot of
autoworkers wanted their kids to go
to UM not the woodward beauty school.
Who cares if these people leave at this point? Fannie and Freddie are part of the executive now and might as well be staffed with GS employees.
I mean the government already has them intentionally making decisions that will cost them billions and billions of dollars. You can't honestly say they are for-profit companies at this point. They are just one more means to try to prolong the housing correction.
Good points by Pat and Leroy
I'd love to work for a company that would pay me massive bonuses regardless of my performance. I would sleep all day at my job and party all night at home. The small amount of work I actually do would contribute massively to the company's downfall. I get paid huge bonuses regardless. Oh wait, that's what these guys get! You hear about "lazy government workers" that can't be fired and get paid no matter what. Well, how is this any different? I know the difference, these guys are getting a lot more money.
Many other employers in this economy are laying off employees, freezing pay for employees who stay, cutting back benefits/increasing employee contributions to benefits, forcing unpaid leaves, etc., to weather this storm. It isn't their employees' fault any more than it is the FM/FM employees' fault. And these aren't generally pay-for-corporate performance programs either, and many high performers are hit the same as the middle performers. So while this downturn is unfortunate for everyone, I don't see why the FM/FM employees should be exempted from the notion that if the employer can't afford to be generous any more and is running a loss, it has to make cutbacks. This would be true even if fed. funds were not being used to help them.
Tom (arlingtonva),
Let's say you have a financial company that you took over. It is a very complex structure, not necessary most efficient. Wages in this company are in general competitive with economy, but not the wall street. Your short-term intent is to keep the company in business (and it's short-term failure means your failure, you'll be gone if it happens), long-term intent you do not know yourself.
You also want to change the way this company operates, but gradually.
You cannot bring any people with GS expertise in, they are generally not qualified in structured finance (and they are not cheaper than current workforce, check GS pay for SEC and other financial regulators). You can bring consultants, but they will be much more expensive and will take forever to transfer knowledge.
So you can be nice with the current employees, or you can be harsh. If you are nice you probably get some nice performance out of them. If you are harsh, they will probably stay (for many of them there is nowhere to go, job market is pretty brutal), but will not work that hard. Especially in the light of uncertainty in front of them (not much of a career, chance of company ceasing to exist, etc).
These decisions are operational decisions, I cannot say that i support them or against them, but I can see very reasonable arguments for both.
Konstantin: let's be honest: structured finance isn't rocket science.
Novawatcher,
It depends. If you consider risk area, it is exactly rocket science. Wall street firms used to hire the phds with degrees in areas such as gas dynamics to get reasonable models of structured products behavior. Did not use these models properly, greedy idiots.
Apart from that, there are a lot of areas such as accounting, technology, etc, where you need some company-specific expertise to run the shop effectively.
At the same time shops like ginnie mae only have about 100 employees and manage their business ok. It is usually the attributes of a really BIG public company that make it clumsy and difficult to manage. Trust me, if government could get rid of the fannie/freddie in an effective and painless manner they would love to do that. They cannot.
I guess my point is that their methods aren't so specialized that there aren't lots of folks who couldn't pick up the slack. There are tons of PhDs, in everything from Bio, to Cognitive Psych, Statistics, Engineering, etc., that make 5-figure salaries and would be happy to to pick up the slack.
novawatcher,
problem is, fannie/freddie were not exactly wall street compensation-wise (unless you get higher on the management scale). they probably pay better than an average research job, but this is less exciting work for sure.
for me a management problem with these companies is that their global strategy was wrong during bubble times. this strategy was probably a doing by no more than 5-10 people with C-level titles (who used to receive the most part of the bonuses, i can bet). they are gone, i hope.
i remember that these companies were referred as a safe place but nothing exciting in terms of comp.
these days they have to become more agile, and work more, so it makes sense to reward high-performers and get rid of low-performers.
Post a Comment