Top executives at Fannie Mae (FNMA) and Freddie Mac will receive reduced compensation as their regulator continues to cut pay and bonuses at the government-owned finance companies.
The 2012 pay program for the companies eliminates bonuses and establishes a target for chief executive officer pay at $500,000, the Federal Housing Finance Agency announced today. With the changes, total compensation for top executives has been reduced by nearly 75 percent since the companies were taken under government control in 2008.
The number of senior executives has been reduced from 91 in 2008 to 70, the FHFA reported.
FHFA Acting Director Edward J. DeMarco began reducing pay at the mortgage companies after they were seized in 2008 amid mounting losses from failing home loans.
The companies rely on taxpayer aid for survival, drawing almost $190 billion so far.
As the size of their bailout has grown, pay at the mortgage companies, which own or guarantee almost half of all U.S. home loans, has become a point of criticism, particularly from members of Congress.
Last month, the U.S. Senate moved to ban executive bonuses at Fannie Mae and Freddie Mac (FMCC), voting 96-3 to approve a measure from Republican John McCain of Arizona and Democrat John Rockefeller of West Virginia. The measure was introduced after the FHFA approved nearly $13 million in bonuses to 10 executives.
In the House, where the Financial Services Committee has passed a similar measure, committee Chairman Spencer Bachus praised the FHFA announcement, calling it a “long-overdue change.”
“The taxpayer funded bailout of Fannie Mae and Freddie Mac is the biggest bailout in history,” the Alabama Republican said in a written statement. “The lavish compensation packages and million dollar bonuses that have been given to top executives of these two failed companies are an outrage to the taxpayers whose assistance is the only thing keeping Fannie Mae and Freddie Mac afloat.”
CEOs Michael J. Williams of Fannie Mae and Charles Haldeman Jr. at Freddie Mac have drawn particular criticism. In 2011, Williams was paid $5,258,500 and Haldeman $3,798,500.
Both have announced plans to leave the companies this year. The search for replacements is emphasizing the public-service aspects of the chief executive job in addition to experience, DeMarco said.
New Job Description
The chief executive will be “more akin to that of government service than that of a corporate chieftain,” DeMarco said.
The compensation levels were released as part of a broader strategic plan to reduce costs and risk at the companies, which package and sell mortgages to investors, and charge fees to guarantee the loans’ principal and interest. The plan calls for the companies to set uniform fees that are tied to the level of risk that the mortgages will go into default.
By October, FHFA also wants to begin a program to sell high-risk slivers of mortgage bonds without that guarantee as a way to share losses from defaults.
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