President Barack Obama’s administration has joined Democratic and Republican lawmakers in attacking potential raises for the top executives of Fannie Mae and Freddie Mac.
“The reason these entities are different than some of the financial entities you see in the private sector is they benefit significantly from a backstop that is provided by the taxpayer,” White House press secretary Josh Earnest told reporters Tuesday at a briefing in Washington.
The mortgage giants, which have operated with explicit U.S. backing since 2008, were told by their regulator, the Federal Housing Finance Agency, that they could consider submitting proposals for new pay plans for Fannie Mae Chief Executive Officer Timothy Mayopoulos and Freddie Mac CEO Don Layton, who each made $600,000 last year even as some senior employees made higher amounts.
FHFA Director Mel Watt, who is overseeing the conservatorships of the two companies, said the current compensation framework limits their ability “to promote retention of their CEOs, to develop reliable CEO succession plans, and to ensure continuity of operations and organizational stability.”
Representative Ed Royce, a California Republican, said in a statement that the potential change could allow the CEOs to make more than $7 million annually and would be “absolutely unconscionable.” He’s planning to introduce a bill Friday to prevent the pay increases. Senator Mark Warner, a Virginia Democrat, said in statement that the plan showed that it’s “long past time for Congress to fix this flawed business model and enact responsible reforms to our housing finance system.”
Egbert L.J. Perry, CEO of Integral Group LLC and chairman of Fannie Mae’s board of directors, said in a statement that FHFA’s decision is “an important and necessary step to ensure retention, succession and continuity of leadership.”
Christopher S. Lynch, Freddie Mac’s chairman, said its board “shares the view that retention of management and effective succession planning are crucial to ensuring Freddie Mac’s continued safety and soundness.”
The Treasury Department “has consistently communicated to FHFA that a change in CEO compensation at Fannie Mae and Freddie Mac is not appropriate, given that taxpayers continue to backstop both enterprises,” Adam Hodge, a spokesman, said in an e-mail. “Ultimately, FHFA, not Treasury, has sole authority over executive compensation at Fannie Mae and Freddie Mac. Nonetheless, Treasury strongly recommends that FHFA continue its existing limits on CEO compensation.”
Layton said in a telephone interview that he wouldn’t comment on his own compensation process.