Thread: Executive pay brouhaha snares Newt Gingrich - Paid $1.6 mil

ELECTION 2012

Executive pay brouhaha snares Newt Gingrich

Paid $1.6 million to advise Freddie Mac about conservatives

Posted: November 16, 2011
4:10 pm Eastern
By Jerome R. Corsi
© 2011 WND


Newt Gingrich

Public outrage over the millions of dollars paid top executives in the government-sponsored mortgage giants Fannie Mae and Freddie Mac took a new twist today with the disclosure that Republican presidential hopeful Newt Gingrich received between $1.6 million and $1.8 million in consulting fees from two contracts with Freddie Mac over the past eight years.

During the CNBC-sponsored debate for GOP candidates last week, he admitted to receiving some $300,000.

The consulting fees were paid not to Gingrich directly, but to his consulting firm, The Gingrich Group, according to a report published by Bloomberg. http://www.businessweek.com/news/2011-1 ... e-mac.html

His first contract with Freddie Mac began in 1999, five months after he resigned from Congress where he had been House Speaker. Bloomberg further reported Gingrich was paid a self-renewing, monthly retainer of $25,000 to $30,000 between May 1999 and 2002.

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Former Freddie Mac officials familiar with Gingrich's work told Bloomberg Gingrich was asked "to build bridges to Capitol Hill Republicans and develop an argument on behalf of the company's public-private structure that would resonate with conservatives seeking to dismantle it."

Doug Duvall, a spokesman for Freddie Mac, confirmed to WND that Gingrich was a consultant, not a lobbyist, but declined to elaborate on the nature of Gingrich's work.

Until now, the House Committee on Oversight and Government Reform has pressed the Obama administration to justify paying seven-figure compensation to the government employees managing Freddie and Fannie since the federal government took over the two mortgage government-sponsored giants, while President Obama has roundly critiqued private bankers and Wall Street executives for receiving high compensation during the continuing government-bailout era.

The dilemma Democrats in Washington face is whether an attack on Gingrich will backfire, raising additional questions why the Obama administration has not intervened in Freddie and Fannie executive compensation levels.

Or will a double standard apply, with the mainstream media investigating and reporting extensively on Gingrich's compensation, while ignoring the role Democrats have played in mismanaging the two agencies, dating back to the Clinton administration?

In 2006, the Federal Housing Enterprise Oversight office reported Democratic Party operatives James Johnson and Franklin Raines earned millions – Johnson earning roughly $100 million as Fannie Mae CEO from 1991-1998 and Raines earning more than $90 million as Fannie Mae CEO from 1999-2005 – while manipulating accounting to bolster their pay.

Yesterday, three top housing agency officials – Edwardo J. DeMarco, acting director of the Federal Housing Finance Agency; Michale J. Williams, president and CEO of Fannie Mae, and Charles E. "Ed" Haldeman, Jr., president and CEO of Freddie Mac, admitted under tough questioning from Republican and Democratic members alike of the House Committee on Oversight and Government Reform that the nearly $170 billion in federal government bailouts that Freddie and Fannie have received since 2008 may never be repaid taxpayers.

See the exchange:

Video: http://www.youtube.com/watch?v=tZHTZIVv ... r_embedded

Issa exposes Obama hypocrisy

Yesterday, Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, posted a video on YouTube that displayed clips highlighting Obama's repeated rhetoric attacking private bankers and Wall Street executives for excessive compensation, while during the same years, 2009-2010, Fannie and Freddie paid $35 million in executive bonuses:

Video: http://www.youtube.com/watch?feature=pl ... SokGrpCoWA

"While taxpayers are saddled with billions in losses, executives at Fannie Mae and Freddie Mac are being rewarded with millions for their efforts to pursue public policy goals of this administration," Issa said, releasing a 13-page committee staff report on the issue.

"This report examines and explains fundamental criticisms of executive compensation decisions for Fannie Mae and Freddie Mac – decisions made under an administration that excoriates private companies for big bonuses on the backs of taxpayers but looks the other way when our own federal entities heap cash on their executives for a job undone."

The staff report documents that the U.S. Department of Treasury has provided $169 billion in bailout funds since September 2008, when the Federal Housing Finance Administration, FHFA, took Fannie and Freddie into conservatorship as a result of mounting loses in mortgage-backed securities.

The government-sponsored enterprises, or GSEs, Fannie and Freddie became de facto government agencies since 2008, with the two agencies funded largely through preferred stock purchase agreements from the Treasury.

According to FHFA projections, by the end of 2014, Treasury assistance to Fannie and Freddie is estimated to total somewhere between $220 billion to $311 billion.

"Since the enterprises (Fannie and Freddie) have become government-funded entities, lavish payments have been doled out to their senior executives, and taxpayers have been footing the bill," the House Oversight and Government Reform Committee report concluded.

Consider the following staff report findings:

• In 2009 and 2010, the enterprises' top six officers were given a total of $35 million in compensation;

• Of that amount, a total of $17 million in compensation was given to the CEOs of the enterprises;

• Additional bonus installments for 2010 may still be forthcoming, and the two CEOs stand to make a total of $12 million in 2011;

• In addition, an executive has been awarded a substantial signing bonus – $1.7 million – upon joining Fannie Mae.

"As these figures indicate, senior executives at Fannie Mae and Freddie Mac have become the highest compensated workers on the federal payroll – making as much as eight times more than the president of the United States," the staff report noted. "The executives even make more than their conservator, FHFA Acting Director Edward J. DeMarco."

The chart below, prepared by the House Oversight and Government Reform Committee staff, summarizes the compensation for the top six executives at Fannie Mae and Freddie Mac in 2009 and 2010, the first two years after they were placed in conservatorship:



The staff report contrasted the Obama administration's lack of outrage at the Fannie and Freddie executive compensation packages, compared to Obama's reaction in March 2009, after reports surfaced that AIG executives had been awarded $121 million in bonuses after AIG received a $170 billion taxpayer-funded bailout.

Then, speaking from the East Room, President Obama responded angrily, saying, "This is not just a matter of dollars and cents. It's about our fundamental values."

Referring to the AIG executives, Obama asked pointedly, "How do they justify this outrage to the taxpayers who are keeping the company afloat?"

At the hearing yesterday, DeMarco defended the Freddie and Fannie executive compensation by arguing the existing level of compensation was necessary to attract and retain the talent needed to run the entities.

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Speaker Gingrich supported GSE's and Fannie and Freddie in 2007. This interview sounds like he was more than just a historian.


Market-Based Models Are Key to Transforming U.S. Government to a 21st Century Organization

Newt Gingrich, former Speaker of the U.S. House of Representatives,
discussed his vision for transforming government into a 21st century
organization at a recent meeting for Freddie Mac employees. In our feature interview, Gingrich explains the unique role of the government-sponsored enterprise (GSE) model.

Q: You advocate a profound transformation
in the model of government, from what you call the current model of
"Bureaucratic Public Administration" to a "21st Century Entrepreneurial Public
Management" model. Let's start with the bureaucratic model – what is it, and
what is wrong with it?

Gingrich: Imagine walking into a government office
and seeing no telephones, no fax machines, no computers. Instead, you see a
clerk working under a gas light, writing with a quill pen dipped into a bottle
of ink. You would see right away that trying to run a modern-day government
program out of that office would be hopeless. What may not be as readily
apparent is that today's model of government – the bureaucratic model – is just
as obsolete as that office. Government today is organized around highly
centralized bureaucracies. Decisions are made at the top and disseminated down
to the ranks. The key measure of success is process – following to the letter
detailed instructions about the "right" way to do things. Personal initiative,
innovation, and creativity are all strongly discouraged. The result is that
government moves very slowly, uses resources very inefficiently, and usually
fails to get the job done in a timely or effective manner.

Q: And you argue that the bureaucratic model is completely
inadequate to address the opportunities and challenges of the Information
Age.

Gingrich: Absolutely. The information and
communication technologies of today are driving revolutionary changes in the
very structures of our economy and society. Because of computers and the
Internet, information can be captured, analyzed and synthesized as never before.
Businesses are using information technology to completely reinvent how they
produce and distribute goods and services – this more than anything else is
driving the incredible increases in productivity we are seeing. Technology also
empowers individual citizens in ways nobody dreamed of 20 years ago. Anybody
with a computer and Internet access can obtain information and knowledge that
until about 10-15 years ago, was available only to a few people. For example,
the Library of Congress has millions of documents online that anybody can access
at any time. Individuals can share and disseminate this information with each
other quickly and easily through blogs, e-mail, and instant messaging.

Information technology and communications are decentralizing the economy and
society. They are flattening hierarchies and creating networks. And the pace at
which we obtain, disseminate and use knowledge is fast and getting faster. One
thing stays the same: knowledge is power. But knowledge now is available to
everyone, not just a small elite. Meanwhile, bureaucratic government remains
stuck in the Industrial Age. It is hierarchical and slow and inefficient. It
cannot begin to keep up with the speed of the Information Age. It's like an old
Model T trying to keep up with a Ferrari.

Q: How would the "21st Century Entrepreneurial Public
Management" model improve the effectiveness of government?

Gingrich: It starts with a different measure of
success. Bureaucratic government focuses on process – success means following
procedures, checklists, regulations. Entrepreneurial public management focuses
on results – success means achieving specific objectives in the most effective
and efficient manner. And this change in focus is key. It changes the way you
approach issues. On any given issue, bureaucratic government typically says "no,
because…" But if your measure of success is results, you begin saying "yes, if…"
I'm not saying process is unimportant. But results are the key metric.

Government under the entrepreneurial public management model would flatten
hierarchies and use networks to connect people across the entire system. It
would both empower and encourage its employees to apply information technology
to use resources more efficiently, reduce costs, and achieve results more
effectively. It would learn from the successes of the private sector. Let me
hasten to add that this does not mean simply applying the private sector model
to government. Government obviously plays a different role in society. Its
activities are and should be subject to a greater level of public disclosure and
accountability. So government has to develop a model suitable to its role, but
one that adopts the successes of others and adapts to the changing world we live
in.

Q: A key element of the entrepreneurial model is using the
private sector where possible to save taxpayer dollars and improve efficiency.
And you believe the GSE model provides one way to use the private
sector.

Gingrich: Some activities of government – trash
collection is a good example – can be efficiently contracted out to the private
sector. Other functions – the military, police and fire protection – obviously
must remain within government. And then there are areas in which a public
purpose would be best achieved by using market-based models. I think GSEs
provide one of those models. I like the GSE model because it provides a more
efficient, market-based alternative to taxpayer-funded government programs. It
marries private enterprise to a public purpose. We obviously don't want to use
GSEs for everything, but there are times when private enterprise alone is not
sufficient to achieve a public purpose. I think private enterprise alone is not
going to be able to help the Gulf region recover from the hurricanes, and
government will not get the job done in a very effective or efficient manner. We
should be looking seriously at creating a GSE to help redevelop this region. We
should be looking at whether and how the GSE model could help us address the
problem of financing health care. I think a GSE for space exploration ought to
be seriously considered – I'm convinced that if NASA were a GSE, we probably
would be on Mars today.

Certainly there is a lot of debate today about the housing GSEs, but I think
it is telling that there is strong bipartisan support for maintaining the GSE
model in housing. There is not much support for the idea of removing the GSE
charters from Freddie Mac and Fannie Mae. And I think it's clear why. The
housing GSEs have made an important contribution to homeownership and the
housing finance system. We have a much more liquid and stable housing finance
system than we would have without the GSEs. And making homeownership more
accessible and affordable is a policy goal I believe conservatives should
embrace. Millions of people have entered the middle class through building
wealth in their homes, and there is a lot of evidence that homeownership
contributes to stable families and communities. These are results I think
conservatives should embrace and want to extend as widely as possible. So while
we need to improve the regulation of the GSEs, I would be very cautious about
fundamentally changing their role or the model itself.

Q: This is not a point of view one normally associates with
conservatives.

Gingrich: Well, it's not a point of view
libertarians would embrace. But I am more in the Alexander Hamilton-Teddy
Roosevelt tradition of conservatism. I recognize that there are times when you
need government to help spur private enterprise and economic development. Look
at our own history. The government provided railroad land grants to encourage
widespread adoption of what was then the most modern form of transportation to
help develop our country. The Homestead Act essentially gave land away to those
willing to live on it and develop it. We used what were in effect public-private
partnerships to bring telephone service and electricity to every community in
our nation. All of these are examples of government bringing about desired
public purposes without creating massive, taxpayer-funded bureaucracies. To me
that is a pragmatic and effective conservative approach.

Former Speaker of the U.S. House of Representatives Newt Gingrich is an
author, commentator, and founder of the Center for Health Transformation, and
the Gingrich Group, a communications and consulting firm. He is an advisor to
Freddie Mac.

April 24, 2007

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