Posted by Steve Markowitz on December 10, 2012
The Wall Street Journal reported on the compensation of high paid employees of Fannie Mae and Freddie Mac. Their high compensations indicate a significant problem with the greed of government and the employees who live off of it.
Through much of America’s history, working for the government was considered a public service. In exchange for this service, those that worked for the government received salaries below that paid for similar jobs in the private sector. However, these workers enjoyed greater job security. While the job security remains, many government workers now receive significantly higher total salaries and benefits than their counterparts in the private sector. No longer can this be considered “public service”
While previously independent, Fannie Mae and Freddie Mac have always enjoyed the financial backing of the US government. However, through mismanagement and the downturn in the economy, both had to be taken over by the US government four years ago and have cost taxpayers nearly $140 billion. While one might expect Fannie and Freddie managers to have financially suffered as a result of their mismanagement, that has not been the case.
According to the Journal, for 2011, approximately 330 employees at the vice president level receive a median pay of just under $390,000. The next level down that includes 1,650 employees considered “directors” had median pays of over $205,000. These two categories of approximately 2,000 employees accounted about one-sixth of these companies workforce. Adding insult to injury, the 90 highest-paid executives took home over $92 million in pay.
When questioned about the high salaries, a Fannie Mae spokesperson said: “Our employees are managing…significant risk in an operationally complex market. It is absolutely critical that our compensation is competitive in the market.” If compensation is a driving force behind a person’s decision to work for the government, then such positions are subject to as much corruption or predatory practices as found in their private counterparts. This coupled with the reality that government organizations have proven to be bureaucratic and inefficient demands their privatization.
The taxpayer funds dumped into Fannie Mae and Freddie Mac are no different than the bailout of the private banks, General Motors and others. It is a reward for those that have been inefficient and/or imprudent at the expense of those who have been more successful. Such bailouts have become the most destructive force against the American capitalism.
Posted in Fannie Mae | Tagged: Bailouts, Compensation, Fannie Mae, Freddie Mac, Public service, Salaries | Leave a Comment »
Posted by Steve Markowitz on October 31, 2011
Discussions relating to the challenges state and municipal governments face often include the cost of education. While most Americans agree that the educational process needs repairs, proposed actions are debated.
Those on the Left often express the belief that the educational system can be improved by throwing more money at it. For example, President Obama suggested including billions more for “public school modernization” in his latest jobs plan. This is in the time-honored Progressive tradition that proffers that any societal ill can be cured by government spending. If only it was so easy!
The main school of thought is that America’s education problems are more systemic that include a breakdown of family and a corrupt philosophy within unions that rewards teachers for years of service, rather than performance. This Blog adheres to this view.
Hall of Fame quarterback, Fran Tarkenton, retired from the NFL (National Football League) in 1978 after 17 terrific years. He has since been an entrepreneur and adviser on small business education. Tarkenton published an op-ed in the Wall Street Journal some weeks ago titled What if the NFL Played by Teachers’ Rules? that looks into the problems of public education. To make a point, he interposes the method of compensation and promotion for teachers and NFL players saying: “Imagine the National Football League in an alternate reality. Each player’s salary is based on how long he’s been in the league. It’s about tenure, not talent. The same scale is used for every player, no matter whether he’s an All-Pro quarterback or the last man on the roster. … “. The result of such lunacy is easy to understand. Under such a system the NFL would at best offer a mediocre product that few would be willing to purchase and the league would ultimately disappear.
For those like President Obama who claim that more money can address the problem of education, Tarkenton offers the following statistics in rebuttal:
- Inflation-adjusted spending per student in the Unites States has tripled since 1970.
- America spends more per student than any other Western country except Switzerland.
- Spending on buildings and equipment for schools has doubled since 1989, even after being adjusted for inflation.
Tarkenton correctly concludes that one problem with America’s educational system is the method by which its employees are compensated. Teachers are not rewarded on results or efforts, but merely for years on the job, have little incentive to excel. Worse, poor teachers who have no fear of being terminated for performance continue to teach to the determent of students.
America’s corruptive compensation practices are not only found in public education and the problem is broader than the way unions demand compensation for members. For example, there is rightfully much angst being expressed by the Occupy Wall Street movement relating to Wall Street’s compensation for some of the same executives that helped create the Country’s ongoing financial mess.
The federal government played a role in creating Wall Street’s outrageous compensation packages. First, starting in the late 1990’s, it and the Federal Reserve bailed out Wall Street with historically low interest rates every time the economy slowed down. This led to bubbles and a belief on Wall Street that there was little risk in their increasing risky behavior. Had the government let the recessions occur, i.e. required market corrections, during this ten-year period, Wall Street banks would have had poor profit years that would not only have tempered compensation packages, but more importantly tempered their willingness to make what were outrageously risky investments.
The government’s response to the 2008 financial meltdown was even more outrageous, bailing out the very people who caused the crisis. However, instead of making these capitalist pay the ultimate price for their gross failures, the destruction of their companies, the government bailed them out. That allowed the same executives to retain their jobs with outrageous compensation packages at the expense of the American taxpayer. This grotesque crony capitalism started under the Bush Administration and continues under Obama.
Examples of compensation inequities in America are many. These inequities have intensified in recent years not because of greed or capitalism, but because of peoples’ ability to act on that greed. This increasing ability to act on greed has been enhanced by unnatural market manipulations that range from union demands for government workers, to governmental bailouts of huge banks and companies. Unless these unnatural market manipulations are addressed (stopped) the problem of the inequities will continue. Unfortunately those that govern will instead likely create still more interventions to repair their earlier interventions, which will only exasperate the problems. This madness will continue until a transformational leader emerges with the guts to break the ties between power groups and those that govern.
Posted in Bailouts, Education | Tagged: Bailouts, bankers, Bush, Fed, Federal Reserve, Fran Tarkenton, Greed, Interest Rates, left, NFL, Obama, Occupy Wall Street, public school modernization, Salaries, Teachers, Unions | Leave a Comment »
Posted by Steve Markowitz on January 9, 2011
At the onset of this recession, public anger focused on Wall Street bankers and corporate exclusives that accumulated great wealth as economic bubbles grew. The government sensing the public’s mood, responded with legislation designed to limit this group’s power and compensation. The resulting legislation is doomed to failure since it is merely a political response created by people who have that little understanding as to how the markets work.
An example of the failure of governmental intervention is the Sarbanes-Oxley act inflicted on the people after the Enron debacle. It did little to protect shareholders and only made the accounting industry wealthy. Sarbanes-Oxley did nothing to stop the banking meltdown that occurred in the same decade. In fact it may have played a role in letting investors’ guards down due to the mistaken belief that the Act would protect shareholders in the banking industry.
More recently, the government has inflicted FinReg on America, broad-based financial regulations that purport to address problems in financial industry. It too will fail for the same reasons Sarbanes-Oxley did. This legislation was incredibly championed by Senator Chris Dodd and Congressman Barney Frank, two who played key roles in creating the housing bubble through their earlier interventions into the charters of Fannie Mae and Freddie Mac.
More recently, America’s focus on inequities has fallen on unionized employees, especially those in the public sector and those in industries that receive public support. The washingtonexaminer.com recently ran two stories highlighting abuses by these union members.
One of the Examiner’s stories focused on union salaries in the performing arts area. Here are some of the examples:
- Avery Fisher Hall and Alice Tully Hall in Lincoln Center – average stagehand salary with benefits is $290,000 per year. These are the workers that move musicians’ chairs into place and hang lights.
- Metropolitan Opera – props master received $334,000 in 2010.
- Carnegie Hall – top paid stagehand paid $422,599 in annual salary.
How can such exorbitant pay exist? The reason is the power of the International Alliance of Theatrical Stage Employees union. Two years ago they exerted their power closing most Broadway theaters during a 19 day strike. This willingness to such down an industry or governmental function is how salaries get out of hand. An industry’s or government’s unwillingness to say “no” over extended periods guarantees the inequities will be created and paid for by future generations.
As outrageous as the stagehand salaries are, public anger over wages is focused on what public sector employees are being paid by taxpayers. Where in earlier times public sector employees received lower wages in return for relatively safe jobs and serving the public, they now often make significantly more than their private sector counterparts. The Examiner supplied the following examples of governmental workers in Maryland and Virginia.
- The top administrator for Montgomery County, Maryland, makes more than Vice President Biden. The same for Fairfax County, Virginia.
- The District’s police chief for Fairfax makes more than the Chief Justice of the U.S. Supreme Court and Speaker of the House.
- The Montgomery County Chief Administrative Officer earns $266,000 annually.
- The Fairfax County Executive earns $240,000 per year.
- The Washington D.C. City Administrator, an appointed position, earns $225,000.
- The Montgomery County Schools Superintendent earned about $500,000 in 2010.
- Not including overtime, Fairfax has nearly 800 employees making more than $100,000 per year.
- At least 50 Maryland county managers and directors are paid more than its governor’s $150,000 base salary.
- Nearly 1,200 Maryland employees make more than $100,000 per year when overtime is included.
When a bureaucrat is questioned about these outrageous governmental salaries, they inevitably respond by claiming that the high salaries are required to attract higher talent. That dog no longer hunts given the current high unemployment rate and availability of talent for any job. In addition, governments at all levels have poorly managed the peoples’ finances and continually supply unacceptable services.
States throughout America are on the brink of insolvency. The same for many municipalities. A major cause is the high salaries paid to state and municipal workers and the astronomic amounts due to their employee pension obligations.
How did we get to this sad state? The seeds were sown when public employees were allowed to unionize. Unlike in the private sector where companies that overpay and supply poor products are punished in the marketplace and ultimately may be shut down, public “industries” are often protected monopolies. However, unlike naturally existing parasites that do not take enough resources from its host to kill it, the public employee unions have gone too far and have made many of their hosts terminal. With states and municipalities unable to pay their bills, we are approaching an end to the public employee greed-fest. Economic realities will not only require governments to say “no” to the unisons, but public outrage will demand more equitable compensation for taxpayer employees.
The decision to allow public employees to unionize was a dereliction of duty by politicians. Those responsible are long gone. Like most governmental decisions, this one was based on politics, not sound economics. This is another example as to why the federal government must have its power limited by a strict interpretation of the Constitution, a document designed to limit the federal government’s power. The Founders understood that without such limits, the government would create the kind of mess that the United States now finds itself.
Posted in Unions | Tagged: Alice Tully Hall, Avery Fisher Hall, Barney Frank, Christopher Dodd, Fairfax County, Fannie Mae, FinReg, Freddie Mac, International Alliance of Theatrical Stage Employees, Lincoln Center, Maryland, Montgomery County, Salaries, Sarbanes-Oxley, Stagehands, Unions, Virginia, Wages | Leave a Comment »