The regulator for Fannie Mae
Lawmakers from both parties have expressed shock at revelations the two mortgage finance firms, which have been propped up with about $169 billion in taxpayer aid, were paying out $12.79 million in bonuses for ten executives.
At the present, my plan for executive compensation is to continue to seek opportunities for gradual reductions, particularly when executives leave, Edward DeMarco, acting director of the Federal Housing Finance Agency, told the Senate Banking Committee.
He defended the pay as needed to retain qualified executives to manage risks and limit taxpayer liabilities, an effort to push back against moves by lawmakers to block it.
The American taxpayer should not have to subsidize million dollar compensation packages for Fannie and Freddie executives, the top Republican on the panel, Sen. Richard Shelby of Alabama, said. This is just another example of the flawed structure of the two government-sponsored enterprises.
A House committee on Tuesday is scheduled to vote on a bill to suspend the compensation packages. If passed, the bill would go for a vote in the full House. A similar measure in the Senate would prohibit top employees from receiving big bonuses as long as the companies remain in government conservatorship. Lawmakers from both parties have supported those bills.
DeMarco said the companies, the top two providers of funding for U.S. mortgages, have to recruit employees from high-paying financial firms that provide specialized skills.
We have an entire competitive marketplace in the industry that suggests compensation is an important factor in attracting and retaining top talent, he said.
Fannie Mae and Freddie Mac were taken over by the government in 2008 as soured home loans threatened insolvency. Given the central role they play in the U.S. mortgage system, the Treasury offered them an unlimited credit line through next year to protect the already battered housing sector.
DeMarco said any changes in pay should not be a sudden shock and he said the best way to reduce compensation would be for lawmakers and the Obama administration to decide on the future structure of housing finance. Both the administration and Republican lawmakers want to eventually wind the two firms down.
Then we could have a final resolution of Fannie Mae and Freddie Mac in conservatorship, which would resolve the compensation issue once and for all, he said.
The pay packages approved by their regulator have followed the same pattern over the last few years. The bulk of the pay is set by the boards of Fannie Mae and Freddie Mac and approved by FHFA in consultation with the Treasury Department.
(Reporting by Margaret Chadbourn; Editing by Andrew Hay)