The chief regulator for Fannie Mae and Freddie Mac defended bonuses and salaries at the government- owned mortgage-finance companies, saying executive pay is at or below the median of similar enterprises.
“I need to ensure that the companies have people with the skills needed to manage the credit and interest rate risks of $5 trillion worth of mortgage assets and $1 trillion of annual new business the American taxpayer is supporting,” Edward J. DeMarco, acting director of the Federal Housing Finance Agency, said in a letter to lawmakers dated today.
The letter was a response to Senate criticism of compensation at Fannie Mae and Freddie Mac, FHFA said in a statement.
Fannie Mae and Freddie Mac have survived on Treasury Department aid since they were seized by the federal government in 2008. Since then, they’ve drawn more than $170 billion even as bad loans continue to damage their books. Both companies reported third-quarter losses.
In recent weeks, lawmakers have leveled fresh criticism at the companies’ bonuses and pay. 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.
“I well understand your concern about the possibility of wasteful spending,” DeMarco said in today’s letter. “I consider it the most important part of my job to minimize any further taxpayer costs.”
Compensation for the companies’ top executives totaled $35 million for 2009 and 2010, according to a report from the FHFA Office of Inspector General. The companies’ pay structure was established in consultation with the Treasury and Kenneth Feinberg, who led a review of executive pay under the 2008 Troubled Asset Relief Program or TARP. Pay for Fannie Mae and Freddie Mac executive officers was reduced by an average of 40 percent under DeMarco’s plan.
On Nov. 4, Democratic and Republican senators wrote to DeMarco asking him to make “substantial changes” to the pay plans.
The letter, signed by Alaska Democrat Mark Begich, Republican John Thune of South Dakota and 58 other senators, called the bonuses “wasteful” and said the argument that they’re needed to attract talent “strains credulity.”
The House Financial Services Committee has scheduled a Tuesday vote on legislation that would put Fannie Mae and Freddie Mac employees on a government pay scale. The same day, the Senate Banking Committee will hold a hearing where DeMarco is scheduled testify.
“American taxpayers are already on the hook for $170 billion,” said Representative Shelly Moore Capito, a West Virginia Republican on the committee. “There is zero justification to give their top executives cushy pay raises while over 14 million Americans can’t find work.”
The House Oversight and Government Reform Committee has invited Williams and Haldeman to testify on Nov. 16.