A group of top Republicans on the House Financial Services Committee want to slash the pay of executives at mortgage giants Fannie Mae and Freddie Mac by 97 percent.
Rep. Spencer Bachus, an Alabama Republican, wants executives at Fannie and Freddie, which were placed under government control by former Treasury Secretary Henry Paulson in 2008, to be paid at the highest end of the government pay scale, or just under $200,000 per year.
"There is no better example of the kind of misaligned compensation incentives that contributed to excessive risk-taking in the financial industry than those that were, and continue to be, in place at Fannie Mae and Freddie Mac," Bachus said on Thursday in a statement.
The proposal comes a day before Committee Chairman Barney Frank, a Massachusetts Democrat, holds a hearing on executive compensation as public outrage over big bank bonuses grows.
"The goal of this legislation is to ensure that taxpayers are protected from rewarding executives at these entities with outsized compensation packages while they are a government agency," Bachus said.
"Taxpayers have a substantial interest in stability and liquidity being restored and maintained in the nation's housing markets, as well as a direct financial stake in the efficient operations of the Enterprises," Federal Housing Finance Agency Acting Director Edward DeMarco said in a statement.
"Congress will ultimately determine the future of these Enterprises and the structure of our housing finance system. As this debate progresses, it is in the taxpayers' interest that the Enterprises attract and retain the requisite expertise," he said.
The Republican bill is unlikely to attract much Democratic support. A spokeswoman for Frank did not immediately respond to a request for comment.
Fannie Mae was formed in the late 1930s in the wake of the Great Depression as a government agency and was chartered by Congress in 1968 as a private shareholder-owned company in order to take it off the federal books.
But its congressional charter provided an implicit guarantee from Uncle Sam. As the financial crisis unfolded in 2008, the guarantee was made explicit when Paulson effectively took control of the firms, though he stopped short of full nationalization by placing them in a conservatorship in order to keep the firms off the federal balance sheet.
The government controls 79.9 percent of the firms — just below the 80 percent threshold that would have forced them to be on the books.
On Dec. 24, the Obama administration announced it was extending an unlimited credit line to Fannie and Freddie, which would keep them afloat no matter how high their losses. So far, the two agencies have tapped about $111 billion from the Treasury Department.
The Christmas Eve announcement has caused some lawmakers on Capitol Hill to question the notion that the firms are not effectively nationalized already.
© 2024 Thomson/Reuters. All rights reserved.