When It Raines...

It will be illuminating to see if all the good left-wingers cheering on the effort of Eliot Spitzer's attorney general's office to get Richard Grasso to disgorge $112 million in back compensation will take the same position in respect of the effort launched yesterday by the director of the Office of Federal Housing Enterprise Oversight, James Lockhart III, to recover $91 million in back pay from Franklin Delano Raines.

The two situations are different of course; Mr. Grasso's compensation was amassed over a career at the New York Stock Exchange that began in 1968, while Mr. Raines's fortune at the Federal National Mortgage Association was made over a shorter period, between 1998 and 2004. Mr. Grasso's NYSE was a not-for-profit, while Fannie Mae pays taxes. No one, so far as we are aware, has questioned Mr. Grasso's record at the Stock Exchange, just the size of his compensation and his dealings with his board about it, while in the Raines case, his performance at Fannie Mae, particularly its accounting shenanigans, is exactly the nub of the matter. Our friends at the Wall Street Journal editorial page seem to be for Mr. Grasso but against Mr. Raines.

Even so, in each case, a government regulator is seeking, in a non-criminal case, to force an executive of a company to give back pay that he was awarded by a board. In Fannie Mae's case, the board was supposed to be representing shareholders, though, according to the company's charter five board members are appointed by the president of America. In the NYSE's case, the board in the Grasso era represented both the exchange's member broker-dealers — the "seatholders" — and the investing public.

We don't carry a brief for either Mr. Raines or Mr. Grasso, but it strikes us that, in the absence of a criminal conviction demonstrating gains are misbegotten, it's an unusually strong regulatory measure for the government to try to force an executive to pay back money that the executive was paid by an independent, elected board. It's one thing for the board to try to go after the executive on behalf of the shareholders. Or for a faction of the shareholders to go after the executive or the board on behalf of the shareholders. It's quite another thing for the government to get in the business of retroactively adjusting compensation.

Somehow, we have a sense this is a one-way street — we can't recall any case of a government regulator intervening to tell a corporate board that they have underpaid a chief executive and that they should go back and pay him more. But why, given the logic of the lunges being made for the wealth earned by Messrs. Grasso and Raines, should executives who feel they were underpaid or regulators who conclude an executive was underpaid not be able to force the issue?

In the meantime, observers of Senator Clinton's presidential campaign can look forward to when she starts talking about the balanced budget — sorry, "surpluses as far as the eye could see" — during her husband's presidency. The director of the White House's Office of Management and Budget during that golden era was none other than Franklin Delano Raines, the same man that government regulators say in his next job oversaw accounting irregularities so severe that he should have to return $91 million in back compensation. It will be a case to watch.