(Updates with Treasury Department role, House bill approved, starting in fifth paragraph.)
Nov. 15 (Bloomberg) -- The chief regulator for Fannie Mae and Freddie Mac defended salaries and bonuses at the government- owned housing-finance companies and said he is planning for “gradual reductions” in compensation.
“My plan for executive compensation is to continue to seek opportunities for gradual reductions, particularly when executives leave,” Edward J. DeMarco, acting director of the Federal Housing Finance Agency, said in written testimony to the U.S. Senate Committee on Banking, Housing and Urban Affairs.
“This approach is consistent with the administration’s notion of a gradual wind down” of Fannie and Freddie, which are now in government conservatorship, DeMarco said in the prepared testimony.
Lawmakers have expressed anger at bonuses and pay to top executives at the companies. DeMarco approved packages in 2009 that awarded a total of $17 million over two years to chief executive officers Michael J. Williams of Fannie Mae and Ed Haldeman of Freddie Mac.
In response to questions from Senator Richard Shelby of Alabama, the top Republican on the committee, DeMarco said that FHFA had consulted with the Treasury Department on the compensation issues, and that neither Treasury Secretary Timothy F. Geithner nor other officials disapproved.
DeMarco stressed that this was strictly a consultation, not a request for approval from Treasury.
“We are ultimately responsible,” DeMarco said.
In his written testimony, DeMarco criticized proposed legislation that would place employees at the two companies on a pay scale equivalent to that for federal workers. That bill was approved by the House Financial Services Committee today.
The two firms need “an orderly transition” to a new system of housing finance, not “a sudden shock,” DeMarco said.
Fannie Mae and Freddie Mac have drawn more than $170 billion in aid from the Treasury Department since they were seized by the federal government in 2008 on the brink of insolvency. Both companies reported third-quarter losses.
--With assistance from Phil Mattingly and Lorraine Woellert in Washington.
Editors: Maura Reynolds, Lawrence Roberts.
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