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Former Fannie Mae Executive V.P. Ed Pinto on the need for Fannie Mae and Freddie Mac to rein in spending, particularly on over-the-top salaries.
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Now that housing agencies -- Mae and Freddie Mac sparking outrage over staggering six figure salaries.
Nearly 2000 not exacts are -- -- some serious stab him on these agencies have -- -- nearly 180.
Billion dollars.
In taxpayer funding and they still tell -- 137.
Billion dollars of that.
For more on this let's bring in Ed Pinto a former Fannie Mae executive vice president.
Chief credit officer he is now president fellow at the -- resident fellow I should say at the American Enterprise Institute.
And -- -- right now these salaries are really bothering a lot of people right now 137.
Billion still owed to the US taxpayer.
I mean 333 vice presidents are making almost 400000.
Dollars.
At these numbers are really out of out of line -- I'd have supported in the past senior management.
President.
Executive vice president CEO -- -- Getting a market base salaries what you get below those and they -- thin the ranks.
Of these directors and vice president's number one and number two they should cut the salaries back -- I said a year ago.
That I thought.
Proposal -- -- bring them under civil service makes sense that actually would help.
Some of the lower level these low level employees because they've given the protection.
Of the civil service retirement plan.
Because -- right now they're actually making more.
Then nongovernment employees I mean they're making them more than a private sector practically for the same job across the board.
Absolutely and as I think it's important to thin the ranks -- that's the other part of this story.
I think Fannie and Fannie case they've been expanding since they've -- a conservative ship I think -- down some.
But Fannie is expanding these -- have to start shrinking that's the whole goal is to shrink them why should they be -- Why should they be expanding.
And then at the same time lowering the salaries for these mid level employees would be the right thing to do.
Right because and I know the argument is that they deal with very technical things they take on high risk we should reward them for you could see that just about any business though.
How we ever going to be able to unravel these agencies as you're -- they're growing they're not getting smaller we need to get rid of them quite frankly at some point.
Right it it's a tricky process.
What what's happening is there -- guarantee fees are going up and congress passed -- law.
A year ago to mandate that an FHFA has been dutifully raised in -- guarantee fees the problem isn't much of fixed FHA.
Then the business is gonna just shift -- shift over FHA and other Ginnie Mae Hannity and and that isn't gonna solve the problem so they've -- they're director DeMarco said a week and a half ago.
That the path to GSE reform ultimately -- you have to deal -- FHA first.
So let's talk about FHA the Federal Housing Administration I mean many years saying that it's it's -- need to bail out soon enough but.
To its credit it is there are better loans being made right I mean part of the problem is a hangover from all the bad loans that were made.
We do have better loans coming to market now will that help in the end.
In the problem is FHA it's really a tale of two cities.
You've got FHA making sort of bad loans are high risk loans.
40% their loans are sub prime leader fight goes below 660 -- -- scores or.
War they have debt ratio total debt ratio in excess of 50%.
That's the bad book.
They've got 60% of business that's the good book.
They're using the good book to average out the bad book and cross subsidize -- the problem is and I just released a study on this that shows that in working class neighborhoods those.
With incomes below the median for a metropolitan area.
These neighborhoods are suffering from extraordinarily high.
Default levels for the 20092010.
Price.
So basically saying they need the bad loans to cover the -- -- State they're using the bad loans that carry the good -- to cover the bad loans they should not be doing the bad loans.
Station they need to make responsible bad loans because stop.
Financing failure FHA as a financing failure and he's working class neighborhoods.
-- -- I really hope we get eventually figure out a way to wrap this up thank you for being with us.
Okay pleasure thank you.
