Martin Hutchinson and Lauren Silva had the dumbest idea, ever, printed in the WSJ today. Their argument: Close Fannie Mae, gradually. “Of course,” they say, “it wouldn’t then be practical to shut Fannie and Freddie Quickly.”
The kicker: “Meanwhile, the GSEs, now in the private sector, could start cutting their salary scales toward civil-service levels. The higher fees and compensation savings combined would compensate taxpayers somewhat for any bailout costs.”
That’s a dumb idea. Fannie and Freddie are financial service companies. Paying Fannie and Freddie staff “civil-service” salaries will ensure the flight of both company’s best talent. These men and women will run to the investment banks and work there, because no one ever settles for a low salary if they can get paid much more elsewhere for the same type of work. Duh.
What happens if Fannie Mae and Freddie Mac lose their best talent? The intellectually inferior staff that stays will undoubtedly make more mistakes. Whoever (i.e. taxpayers) backs the companies’ liabilities will have to pay for these mistakes.
And, for the record, all of Wall Street is in shambles. The decision makers at Fannie and Freddie are no different from the executives at all of the other banks that have been writing down losses. It seems, for now, that the talent pool runs evenly throughout all of the finance institutions playing with mortgages these last years. Change the salary pay, and things will get better at some banks and much worse at others.
Filed under: Market Trends | Tags: fannie mae, freddie mac, stupid comments
Martin Hutchinson and Lauren Silva had the dumbest idea, ever, printed in the WSJ today. Their argument: Close Fannie Mae, gradually. “Of course,” they say, “it wouldn’t then be practical to shut Fannie and Freddie Quickly.”
The kicker: “Meanwhile, the GSEs, now in the private sector, could start cutting their salary scales toward civil-service levels. The higher fees and compensation savings combined would compensate taxpayers somewhat for any bailout costs.”
That’s a dumb idea. Fannie and Freddie are financial service companies. Paying Fannie and Freddie staff “civil-service” salaries will ensure the flight of both company’s best talent. These men and women will run to the investment banks and work there, because no one ever settles for a low salary if they can get paid much more elsewhere for the same type of work. Duh.
What happens if Fannie Mae and Freddie Mac lose their best talent? The intellectually inferior staff that stays will undoubtedly make more mistakes. Whoever (i.e. taxpayers) backs the companies’ liabilities will have to pay for these mistakes.
And, for the record, all of Wall Street is in shambles. The decision makers at Fannie and Freddie are no different from the executives at all of the other banks that have been writing down losses. It seems, for now, that the talent pool runs evenly throughout all of the finance institutions playing with mortgages these last years. Change the salary pay, and things will get better at some banks and much worse at others.
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