It’s hard to understand how out of whack some things are.   But they make great fodder for me!

Fannie Mae I Go Out And Play?

Fannie Mae, the largest U.S. buyer and guarantor of home mortgages, lost $1.4 billion in the third quarter of 2007 due to the housing slump and craziness in the mortgage market. The quasi-government company expects to lose money this year on eight to 10 of every 1,000 mortgages held on its $2.4 trillion book — a steep increase from four to six in 2007.

Net income for the first three quarters of 2007 dropped 57 percent to $1.5 billion, or $1.17 a share, from $3.5 billion, or $3.16, a year earlier according to recent filings.   Fannie Mae has been forced to set aside billions of extra dollars to account for bad home loans. Last month, it slashed its dividend by 30 percent and sold $7 billion in special stock to raise capital to shore up its finances.  Shares of Fannie Mae lost a third of their value in 2007, and continued to decline in January amid expectations that its reliance on subprime mortgages would produce continued write-downs.

Fannie Mae is also facing scrutiny over the possibility that mortgages it bought may have been tainted by inflated home appraisals. New York Attorney General Andrew Cuomo said Nov. 7 he subpoenaed Fannie Mae as part of a probe into “widespread” collusion between lenders and property appraisers.

The “Good News” for us?  Fannie Mae announced that CEO Daniel H. Mudd was paid $12.2 million in compensation for 2007, down 15% from the $14.4 million he was paid in 2006. The compensation included a base salary of $990,000, a bonus of $2.2 million, and a long-term incentive award of $9 million. The incentive award is in the form of stock that vests in four annual installments beginning in 2009. There are no performance benchmarks tied to the stock award.

Sometimes It Pays To Be Bad!

Home Deposited

Home Depot had a really bad 2007. 

• Net Sales - DOWN
• Gross Profit - DOWN
• EBIT (Earnings before income taxes) - DOWN
• Earnings From Continuing Operations - DOWN
• Number of Customer Transactions - DOWN
• Average Sale/Ticket - DOWN
• Average Weekly Sales per Store - DOWN
• Sales per Square Foot - DOWN
• Stock Price in 2007 - DOWN
• Earnings per Share - DOWN
• Operating Expenses - UP

Yikers.

Home Depot board of directors wanted CEO Robert L. Nardelli to amend his compensation deal.  No Duh.

 After making $38.1 million from his last annual contract, Nardelli agreed to give up a guarantee for a minimum $3 million bonus each year. 

When board members asked him to tie some of his future stock awards to shareholder gains, he refused.  After weeks of backroom negotiations, Home Depot announced in early January that the company and Nardelli had “mutually agreed” that he would resign.

The “Good News” for us? Nardelli walked away with a $210 million dollar golden parachute, $20 million in cash.  If you stacked twenty million $1 dollar bills one on top of another, they would reach more than a mile and half in the air.  And if I figure correctly, that $20,000,000 would pay the annual salary for the 500 headquarters employees Home Depot just canned.

And if a $210 million severance package isn’t enough, the former CEO is getting three more years of health care.  That’s enough to make anyone sick.

I guess Sometimes It Pays To Be Bad!