Government-subsidized home loans seldom necessary, says professor

Given ongoing agitation by a chorus of elected officials, the stage may be set for a major overhaul, if not outright abolishment of the nation’s largest home mortgage financing operations, Fannie Mae and Freddie Mac. Radhakrishan Gopalan, who teaches finance at Olin Business School, tells Smart Money that the private market should be able meet home financing needs, in most cases.

Why salary bonuses drive executives to cheat

You don’t have to look far these days to find examples of corporate scandals involving fraud. A new study finds that performance-based pay is to blame for fraudulent behavior and actually motivates people to “cook the books”. Judi McLean Parks, the Reuben C. and Anne Carpenter Taylor Professor of Organizational Behavior at Olin Business School at Washington University in St. Louis and co-author of the study believes the results have implications for CEO compensation plans and the financial difficulties many companies are experiencing today. “All I have to do is look at Enron, Fannie Mae, Freddie Mac to know that this does happen. And now we’ve demonstrated the causal link to contingent pay.” Fraud uncovered at Fannie Mae alone from 1998-2004 has been estimated to be in excess of $10.6 billion.