(Move over, AIG, this is the next outrage. – promoted by David Dayen)

Fool us once, shame on you.  Fool us twice, shame on us.  Given the intense public backlash against the shameful AIG bonuses, it is unthinkable that Fannie Mae would now award million dollar bonuses to four of its top executives.  According to recent news reports, Executive Vice Presidents Kenneth Bacon, David Hisey, Michael Williams, and Thomas Lund will each receive over $1 million in bonuses.  This is unacceptable.

Let’s not forget that Fannie Mae failed last year.  At least $15 billion of precious taxpayer dollars have been injected into Fannie Mae to keep it afloat, and hundreds of billions more are being used to guarantee their loans.  We fire executives for bad judgment.  It is beyond bad judgment for any of Fannie Mae’s executives to accept their million dollar bonuses.  There are many Wall Street executives without a job right now who will happily take top positions at Fannie Mae without the need for million-dollar bonuses.

Fannie Mae executives should already be on thin ice for coming out with guidelines that reward speculators and investors.  The Fannie Mae guidelines issued on March 4, 2009 allow speculators with second homes and investment properties to take advantage of the refinancing component of President Obama’s Making Home Affordable plan.  This directly contradicts President Obama’s repeated statements that his plan will not reward speculators.  Fannie Mae needs to follow the President’s public statements and revise the guidelines immediatley.

We need to clean house on Wall Street.  We need a cultural change where taxpayer interests are placed above corporate greed; where homeowners’ interests are placed above speculators’ interests; and where common sense prevails over utter stupidity.  

I call on Fannie Mae executives to return any bonuses they receive while their company is being propped up by taxpayer dollars.  If they do not, they should be fired.

Ted W. Lieu (D-Torrance) is Chair of the Assembly Rules Committee and former Chair of the Assembly Banking and Finance Committee.  He is the author of the landmark California Foreclosure Prevention Act, which was signed into law last month.

(Welcome Assemblyman Ted Lieu to Calitics!  And yes, enough is enough. – promoted by David Dayen)

“Enough is Enough”

Gordon Gecko in the movie Wall Street famously said, “Greed is good . . . Greed is right, greed works.”  Real life Wall Street, however, reminds us that excessive and unregulated greed wrecked havoc in the mortgage industry and took down our economy.  The core cause of the chaos in our financial sector was the unregulated selling of unsuitable and risky subprime home loans that resulted in a massive wave of foreclosures.

During the mortgage boom, industry players became addicted to the drug of high-yield, adjustable rate subprime mortgages that they foisted on borrowers.  Raking in massive quarterly and annual bonuses, corporate executives didn’t care if borrowers could repay the mortgages a few years later.  It was greed on speed, the future be damned, and now all of us are suffering the consequences.  

More in the extended entry….

The collapse of financial giants Lehman Brothers, Ameriquest, IndyMac Bank, and New Century Financial; the fire sales of the venerable Merrill Lynch, the lawsuit-challenged Countrywide, and WaMu and Wachovia; and the existing taxpayer bailouts of AIG, Bear Stearns, Fannie Mae, and Freddie Mac would NOT have happened if effective laws were in place to prevent predatory and unsuitable home loan products and practices from occurring in the first place.  

Former Federal Reserve Chairman Alan Greenspan contributed to the financial meltdown by taking actions that artificially inflated the housing bubble; promoting risky, adjustable rate mortgages; and worst of all keeping government from effectively regulating the mortgage industry.  In hindsight his decisions were absolutely and categorically wrong in every way possible.  

While we wait for Mr. Greenspan to apologize, his successor, Federal Reserve Chairman Ben Bernanke, and Treasury Secretary Paulson have unveiled the largest government intervention in the free market in the history of the world.  Taxpayer bailouts of large corporations do nothing to reform the broken mortgage system.  While we may be forced to do a short-term fix, ultimately what is needed is fundamental reform.  

Several states have passed effective laws to prevent predatory practices and the making of bad loans.  California’s legislature put on Governor’s Schwarzenegger’s desk AB 1830 (Lieu), a comprehensive subprime mortgage reform bill.  This bill, which received bipartisan support, bans predatory subprime loan practices and exotic, overly risky and unsuitable loan products.  Unfortunately, Governor Schwarzenegger catered to a few special interest groups in the mortgage industry and vetoed AB 1830.

Despite Governor Schwarzenegger’s mistake, there is an opportunity nationally for fundamental reform.  If the Bush Administration wants to use your hard-earned money to bail out Wall Street, then taxpayers should demand major industry reforms.  First, industry should agree that they will no longer fight mortgage reforms such as those contained in AB 1830.  Second, industry should agree to fix executive compensation so that the Gordon Geckos of Wall Street are not incentivized to place short-term profits above long-term financial health.  

Third, we need to slow down the number of foreclosures and stabilize home prices or the problems will get even worse.  This can be done by granting bankruptcy judges the ability to modify loans on the borrower’s place of residence, and by following the Federal Deposit Insurance Corporation’s lead of imposing a foreclosure moratorium.

Approximately 1,300 foreclosure filings occur every day in California, the worst in the nation.  By the time you finish reading this article, another foreclosure filing would have occurred.  This is unacceptable and has to stop.  

If we are going to give massive corporate welfare to banks, then taxpayers better get something in return.  It is time to reform the mortgage industry and Wall Street.  Enough is enough.

Assemblymember Ted W. Lieu represents the 53rd Assembly District.  Prior to his elevation to Chair of the Assembly Rules Committee, he was Chair of the Assembly Banking and Finance Committee.