OK, so the House decided on a 90% tax rate for those retention bonuses. Meaning - when it comes to rich people, contracts aren't really contracts anymore. So if you're an exec at Freddie Mac, what incentive do you have to stay on, risking congressional wrath, and confiscatory taxes? From Bloomberg:
March 18 (Bloomberg) -- Fannie Mae and Freddie Mac’s federal regulator defended million-dollar bonuses for executives at the government-run mortgage finance companies as lawmakers prepared legislation that would recoup most of the money.
Fannie awarded a total of $4.4 million in retention bonuses to four of its top six executives in 2008, to be paid out through February, according to a company filing with regulators on Feb. 26.
“It’s a reasonable and well-thought-out plan,” James Lockhart, director of the Federal Housing Finance Agency, said today after a speech in Washington. Keeping personnel of Fannie and Freddie Mac was critical when the two mortgage-finance companies were taken over in September, he said. He said the extra money is necessary to protect taxpayers’ investment in the mortgage-finance companies.
Well, but retention bonuses don't mean anything anymore. So, for a fraction of a percent in savings, we no longer have this tool, the retention bonus, to keep the best available people in place. These people are in charge of getting maximum value out of these government "investments". Are we happy to have second string players in charge?
And apart from the question of getting and keeping the most competent people; there's the question of experience. Don't we need people familiar with the structure and policies of these GSE's to lead the recovery effort? I'm certainly not qualified, but if I was, I'd think long and hard about taking a job with such incredible responsibility for a salary that was forever renegotiable.
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