First, his opening shot (emphasis mine)…
What worries me is the complete lack of accountability by Fannie’s and Freddie’s executives, as well as Wall Street investment bankers also now being insured by taxpayers. We’ve created the worst form of socialized capitalismâ€”private gains combined with public losses.
These executives and bankers are among the best paid in all of corporate America. Their organizations are treated as if they’re giant investor-driven private sector entities as long as they’re healthy. But when they start to go down the tubes they become public entities with public responsibilities, and the rest of us have to bail them out.
It’s so depressing to think that these private giants are being bailed out by taxpayers…who have see absolutely ZERO gains from their business dealings and will see absolutely ZERO gains from these bailouts. The only people who benefit from Freddie and Fannie are the shareholders, the employees and especially the top brass who pull down massive bucks to run these companies into the ground.
And yeah, I know that they give people loans, but that means they get people into debt. And sure, it’s a service, but I’m sure they foreclose on people just as much as other lenders do. After all, they’re private companies with the sole purpose of making money and driving that stock price up.
Here’s Reich’s solution…
Herewith a modest proposal: when taxpayers insure a giant entity against lossâ€”Freddie, Fannie, Wall Street investment banks, whateverâ€”the entities must agree that (1) for the duration of the bailout, their top executives cannot receive total annual compensation higher than that received by the president of the United States, and (2) the government gets 5 percent of their current valuation as shares of stock (roughly representing the benefit to their shareholders of the federal insurance). If and when the entities become profitable again, taxpayers are thereby compensated for the risk they’ve taken on.
I think this is a lot more fair than what we have now.
What do you think?