US seeks to suspend executives’ bonuses at mortgage giantsNovember 16th, 2011 - 2:11 pm ICT by IANS
Washington, Nov 16 (IANS) The US House Financial Services Committee approved legislation Tuesday aimed at suspending million-dollar bonuses to executives at government-controlled mortgage giants Fannie Mae and Freddie Mac.
The vote was 52-4, with strong support from both parties. The legislation will later be sent to the House floor, and the Senate is expected to take up a similar measure, Xinhua reported.
Twelve executives at the bailed-out firms received roughly $35.4 million in total salaries and bonuses in 2009 and 2010. Fannie CEO Michael J. Williams was paid about $9.3 million for the two years. Freddie CEO Edward Haldeman Jr. received $7.8 million during the period.
“Awarding lavish pay packages to the heads of these companies that have accepted $170 billion in taxpayer cash can’t be defended,” said Representative Spencer Bachus, the panel’s chairman and sponsor of the bill.
Edward DeMarco, acting director of the Federal Housing Finance Agency that is the regulator of Fannie Mae and Freddie Mac, argued in a letter to the Senate Banking Committee that the compensation is necessary to keep talented executives to manage a portfolio of more than $5 trillion in mortgage assets. Without them, taxpayers would incur greater losses.
He said the executives were hired after the companies were taken over by the government in 2008. After the takeover, the salaries for those positions were reduced by an average of 40 percent.
“A sudden and sharp change in pay would certainly risk a substantial exodus of talent, the best leaving first in many instances,” said DeMarco.
Freddie’s CEO and several other board members have declared to step down in 2012.
Fannie and Freddie survived three years ago on government aids after they nearly went bankrupt because of huge losses on risky mortgages. Taxpayers have spent about $170 billion to rescue the two firms.
The two firms reported much wider loss in the third quarter, mostly caused by record low mortgage rates. Fannie asked for $7.8 billion and Freddie requested $6 billion in extra aid from the Treasury Department.
The government estimates the bailout could reach up to $220 billion through 2014.
Fannie and Freddie own or guarantee about half of all mortgages in the US, or nearly 31 million home loans. Along with other federal agencies, they provide more than $5.7 trillion in funding for the US mortgage market, nearly 90 percent of new mortgages over the past year.
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