If Big Companies Need Help, Then Why Do the CEO’s Still Get Huge Bonuses?

Question/Comment: I am writing this with my mom’s permission. I am 12 years old and my question is if companies like Freddie and Fannie needs government help to bail them out, then how come the CEO’s of these company still get a huge bonus or continue to draw big salaries?

Paul Solman: Written like a 32-year old, Yash. Please allow a 64-year old to respond. The CEO’s of Freddie and Fannie no longer get bonuses, so far as I’m aware, and their salaries these days are modest.

Indeed, the last CEO of Freddie, now being hounded by the government because of the need for a scapegoat, was modestly paid – by industry standards – and one of the least greedy executives I’ve ever met.

But if you want to talk about OTHER financial companies like the big banks and Wall Street firms, Yash, your question could not be more appropriate. It suggests a point often made by critics of the government bailout program like economist Dean Baker, whose blog, Beat the Press, I highly recommend.

Baker keeps insisting that in return for government money, institutions should drastically limit the pay of the executives who run them. It’s an idea that some (mostly Republicans) in the current Congress have resisted as “interfering” with the free market. We’ll see if the new Congress agrees.