House Panel Swiftly Moves to Stop Fannie-Freddie Bonuses

The House Financial Services Committee voted 52-4 to suspend $12.8 million in bonuses to executives of government-controlled Fannie Mae and Freddie Mac in a bipartisan outcry aimed at the two bailed-out mortgage-financing entities.
Since they became wards of the U.S. government, Fannie and Freddie have received more than $170 billion in taxpayer funds, amounting to the largest bailout of the financial crisis. And the U.S. Treasury’s credit line remains open to the two firms through the end of 2014.
The firms’ regulator, the Federal Finance Housing Agency (FFHA), has provided a conservative estimate of Fannie and Freddie’s total bailout tab – about $220 billion.
Earlier this month, the FFHA said that the CEO of Fannie Mae received $5.6 million in compensation and the CEO of Freddie Mac received $5.4 million. Under the bill passed by the House panel yesterday, the top executives of Fannie and Freddie could only have earned $218,978 this year.
The bill ensures that executives and employees of Fannie Mae and Freddie Mac will receive compensation that is “in line with pay practices at federal financial regulatory agencies.” The bill does not make those working at Fannie and Freddie Federal employees, but it aligns their compensation with that of Federal employees.
“The taxpayer-funded bailout of Fannie Mae and Freddie Mac is the biggest bailout in history,” Financial Services Committee Chairman Spencer Bachus.  “Adding insult to injury, the top executives of these failed companies receive multi-million dollar pay packages, all courtesy of American taxpayers who are having a difficult time making ends meet these days.”
Edward DeMarco, the acting administrators of Fannie and Freddie’s regulator, said the multi-million-dollar bonuses are necessary to keep the caliber of talent needed for managing risks tied to trillions worth of mortgages “that the American taxpayer is supporting.”
“Today, as Conservator 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 that the American taxpayer is supporting,” DeMarco wrote last week in a letter to a group of bipartisan senators.
The Senate is expected to take up a similar measure halting the Fannie and Freddie bonuses. A bill could make it to the desk of President Obama before year’s end.
Fannie and Freddie own or guarantee more than half of all U.S. mortgages.
 

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