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Cuomo, Frank To Control Wall Street Pay

From the Wall Street Journal:

 

Cuomo, Frank Seek to Link Executive Pay, Performance

By SUSANNE CRAIG

MARCH 13, 2009

New York State Attorney General Andrew Cuomo is in discussions with Rep. Barney Frank and other lawmakers on a plan to tie Wall Street pay to the long-term performance of the firms.

Mr. Frank (D., Mass.), chairman of the House Financial Services Committee, and other prominent Democrats appear to back such a plan, though no legislation has been introduced.

"We plan to put laws into effect, no question," said Mr. Frank. "We have to address this ‘heads I win, tails I break even’ issue." …

Mr. Cuomo is investigating the $3.62 billion in bonuses that were paid out at Merrill Lynch just before it was acquired by Bank of America Corp. at the end of last year. He’s trying to determine if the firm violated securities laws by failing to disclose information in the weeks leading up to the payouts…

Mr. Cuomo is examining ways to further stagger both cash and stock compensation payments over several years, according to people familiar with the matter. This way, if a business built on short-term risk-taking blows up, firms will be able to claw back pay.

A person close to Mr. Cuomo said change is needed but the intent isn’t to micromanage or interfere with the private sector

Is this not chutzpah on an Olympian scale?

Where does it state in the Constitution that Congress or the Executive Branch can control how much a sector of the economy can make, and how they should be paid?

Moreover, there are probably no two people on the planet who are more responsible for the current mortgage/banking crisis than Messrs Cuomo and Frank.

Hopefully by now Mr. Frank’s efforts should be well known to our regular readers.

But in case Mr. Cuomo’s contributions has been forgotten, here are some excerpts from an article we posted back in September 2008, from (of all places) the Village Voice:

Andrew Cuomo and Fannie and Freddie

How the youngest Housing and Urban Development secretary in history gave birth to the mortgage crisis

By Wayne Barrett
August 05, 2008

There are as many starting points for the mortgage meltdown as there are fears about how far it has yet to go, but one decisive point of departure is the final years of the Clinton administration, when a kid from Queens without any real banking or real-estate experience was the only man in Washington with the power to regulate the giants of home finance, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddie Mac.

Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded “kickbacks” to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why

In 2000, Cuomo required a quantum leap in the number of affordable, low-to-moderate-income loans that the two mortgage banks—known collectively as Government Sponsored Enterprises—would have to buy…

Cuomo’s predecessor, Henry Cisneros, did that for the first time in December 1995, taking a cautious approach and moving the GSEs toward a requirement that 42 percent of their mortgages serve low- and moderate-income families. Cuomo raised that number to 50 percent and dramatically hiked GSE mandates to buy mortgages in underserved neighborhoods and for the “very-low-income.” …

While many saw this demand for increasingly “flexible” loan terms and standards as a positive step for low-income and minority families, others warned that they could have potentially dangerous consequences. Franklin Raines, the Fannie chairman and first black CEO of a Fortune 500 company, warned that Cuomo’s rules were moving Fannie into risky territory: “We have not been a major presence in the subprime market,” he said, “but you can bet that under these goals, we will be.” …

But raising the affordable-housing goals was only half the Cuomo story.

The HUD secretary is also required to produce voluminous rules that govern how the GSEs meet those goals, and the 187-page rules Cuomo issued opened the door to abuse.

The rules explicitly rejected the idea of imposing any new reporting requirements on the GSEs. In other words, HUD wanted Fannie and Freddie to buy risky loans, but the department didn’t want to hear just how risky they were…

The lengthy Village Voice article contains much more damming information about Mr. Cuomo’s machinations.

But now Mr. Cuomo and Mr. Frank now want to control the salaries of the executives on Wall Street?

They should be making big rocks into smaller rocks.

(Thanks to BillK for the heads up.)

This article was posted by Steve on Friday, March 13th, 2009. Comments are currently closed.

11 Responses to “Cuomo, Frank To Control Wall Street Pay”

  1. BillK says:

    It’s no longer a matter of just Wall Street firms that took TARP money – now all Wall Street compensation must be controlled.

    From the Wall Street Journal:

    Cuomo, Frank Seek to Link Executive Pay, Performance

    By Susanne Craig

    New York State Attorney General Andrew Cuomo is in discussions with Rep. Barney Frank and other lawmakers on a plan to tie Wall Street pay to the long-term performance of the firms.

    Mr. Frank (D., Mass.), chairman of the House Financial Services Committee, and other prominent Democrats appear to back such a plan, though no legislation has been introduced.

    “We plan to put laws into effect, no question,” said Mr. Frank. “We have to address this ‘heads I win, tails I break even’ issue.” …

    http://online.wsj.com/article/SB123690181841413405.html

    God help us all.

    Yet:

    A person close to Mr. Cuomo said change is needed but the intent isn’t to micromanage or interfere with the private sector.

    “We certainly need to understand the industry’s perspective on the potential unintended consequences of compensation reform before we finalize these long overdue changes,” the person said.

    He doesn’t want to interfere with the private sector?!?!

    Too late, Mr. Cuomo…

  2. oldswimcoach says:

    On executive pay, the meddling of the political class has generated the problem they now seek to fix by limiting the tax deductability of CEO pay. That law generated the current method of pay plus stock options – which in theory ties performance to total compensation. Well, just a few years into it, and low and behold, executives with a fiduciary incentive to manipulate stock price for person gain/compensation are… manipulating stock prices for personal gain/compensation!

    The secondary effect, up until the Obama induced ression and stock market crash, has been significant increases in the income (via stock options) of large corporation CEOs.

    Who could have seen that coming!

    • oldswimcoach says:

      And, I have to wonder. Were all congressmen and senators bullied in grade school and have a need to “get even”, or is it just this current crop in the democratic leadership that has this problem?

  3. GetBackJack says:

    Andrew Cuomo. Operated HUD for S.P.E.C.T.R.E., I mean the Democrats. HUD is singularly the most powerful money-laundering operation in the world. You’ll have to do some research to get that, but you can start by asking Andrew Cuomo about HUD’s missing $59 Billion. Fifty Nine Billion. Never explained. Never audited. Never recovered.

    http://findarticles.com/p/articles/mi_m1571/is_41_16/ai_72328754

    The story with Cuomo can best be understood by reading Catherine Austin Fitts’ superb reporting on HOW THE MONEY WORKS AT HARVARD. Fitts, for those who don’t know, was the first woman on the senior board of Dillon Reed, and rather than a nod to Feminazi politics, Fitts earned her seat. She was hand picked by Jack Kemp to undertake a forensic audit of select government agencies and their financial practices and she succeeded in uncovering the truth, and now she lives in fear for her life in a valley in Tennessee surrounded by her male kin, who are armed ay all times.

    http://www.newsmakingnews.com/lmharvardpart1.htm
    http://www.newsmakingnews.com/lmharvardpart2.htm
    http://www.newsmakingnews.com/lmharvardpart3.htm

    You Must Come To Grips With The Truth. The ‘Democrats’ are a mafia who, like the Communists, understood to wrap themselves in the mufti of political ideology in order to operate openly. They are a gang of vampires living off the body of America.

    • proreason says:

      “The ‘Democrats’ are a mafia who, like the Communists”

      Exactly.

      It has little to do with Socialism or Wealth Spreading. Those are the weapons they use. But the purpose is theft for their own uses. Pure and simple.

      Remember that and you can explain everything that is happening right now.

  4. Yarddog1 says:

    Has anyone ever noticed that if you put a turtleneck on Barney Fwaank that he would look like a busted condom?

  5. 12 Gauge Rage says:

    More big government control. Typical. If they insist upon controlling how much the big dogs make, whose to say they won’t start looking elsewhere to people of average means? These people are like Prince John in the days of Robin Hood. If they so much as hear coins jingling in the peasants’ purse they seize it and leave them with nothing. I swear, I sometimes think these corrupt, controlling bastards would steal the shiny pennies out of a dead mans’ loafers.

  6. pdsand says:

    To say nothing of the fact the officers of a corporation are still essentially the hired help of the shareholders, whose ownership makes THEM financially vulnerable to the performance of the company. I don’t suppose I need to explain corporate governance to anyone here, but as usual, Frank has it twisted and is attempting to distort everything in the name of class warfare.

  7. pdsand says:

    How about compensation reform for members of Congress?

    • Liberals Demise says:

      We now have the foxes eating the chickens in the henhouse and it’s the dogs’ fault!!
      If we switch to silver bullets….will it drop the foxes?

    • MinnesotaRush says:

      pdsand .. right on!!! I personally like the idea that says these birdbrains should make no more than the average income in the US. They can share in the costs of their benefit package like us all. And absolutely NO retirement packages – they shouldn’t be there for life.

      In line with that, we have to build barriers (inpenetrable barriers) to keep this “funny money” from filtering its’ way into politicians bank accounts (or freezers). Start prosecuting the folks who involve themselves in graft, corruption, bribery, etc, .. on BOTH sides of the fence .. the payors AND payees!!!

      Somehow .. we need to again instill an attitude and committment to public service and not self service. The best way I know how to begin accomplishing that would be to start with “following the money”. Bring some clarity and balance into that and we might be able to progress.

      Things might be a little different if we could again have folks in DC who want to SERVE the country and then go back home versus folks who want to make it a career and sell their power and influence (and grab everything they can however they can).

      Many of our past leaders seemed to approach the job with a great spirit of humility and service. We’ve had that replaced with arrogance and self-serving behaviors coupled with a notion of “We won” attitudes. We’ll govern! We’ll rule! We’ll say! I won’t put up with that! I’ll make ___________!

      It is time for a lot of “reform”.


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