Top executives at taxpayer-funded Fannie Mae and Freddie Mac will have their total compensation reduced by nearly 75 percent since the mortgage financing firms were taken over by the government in September 2008.
The pair’s regulator, the Federal Housing Finance Agency, said today that it is eliminating bonuses and establishing a target for chief executive officer pay at $500,000. And the majority of senior executives are now paid less than the median of their counterparts in the market.
“I believe the new compensation program strikes the balance between prudent executive pay, including the elimination of bonuses, with the need to safeguard quality staffing in order to protect the taxpayers’ investment,” said FHFA Acting Director Edward J. DeMarco.
Fannie and Freddie are wards of the government, but the FHFA is an independent regulator overseeing the conservatorship established at the peak of the financial crisis. The arrangement prevented the collapse of the two companies from the weight of billions in risky subprime or faltering mortgages.
Fannie and Freddie are vital to the economy because they own or guarantee about half of all U.S. mortgages.
In addition to cutting compensation, Fannie and Freddie have reduced their number of senior executives by roughly one-fourth, from a pre-conservatorship level of 91 to the current level of 70, with more than 80 percent at both companies now paid less than the market median.
The total target pay for the top 15 executives at each company will drop 63 percent in 2012 from the total pay received prior to U.S. conservatorship.
The U.S. Treasury has bailed out the two companies with more than $170 billion, and there remains an open U.S. credit line to cover quarterly deficits – at least until the future of Fannie and Freddie and the nation’s mortgage market liquidity is finalized.
Last month, the U.S. Senate moved to ban executive bonuses at Fannie and Freddie The measure was introduced after the FHFA approved nearly $13 million in bonuses for 10 executives. The House passed a similar measure.
“The taxpayer funded bailout of Fannie Mae and Freddie Mac is the biggest bailout in history,” said Rep. Spencer Bachus, R-Alabama, 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.”