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A More Moral Bailout

July 20, 2008 - by Donny Shaw

At TPM Cafe, Dean Baker posted an idea for lawmakers looking to put some conditions on the Fannie Mae and Freddie Mac bailout plan they are drafting to include in the housing bill:

>It would be a very simple matter for Congress to tell Fannie and Freddie that the condition of getting bailed out is that there is an absolute cap on the compensation of any employee of $2 million (that includes salary, bonus, stock options, and anything else of value). Similarly, we can tell the investment banks that they must meet the same condition to get access to the Fed’s discount window. Also, Bernanke’s guarantee to the investment banks’ creditors >would only apply to banks that agree to the $2 million cap.
>
>This is how we reduce inequality through the market. We let banks that insist on paying exorbitant salaries go under. (Who would make loans to the investment banks that were explicitly not protected by the Bernanke guarantee?)

As Bloomberg News points out, “Fannie Mae CEO Daniel Mudd, 49, was paid $11.6 million in salary, stock awards and other compensation last year. Freddie Mac Chief Richard Syron, 64, received $18.3 million in total pay last year.” Those are some big salaries to be asking taxpayers to help pay for (not to mention the fact that these CEOs have been doing a bad job…).

Robert Reich has some similar ideas.

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