During the year-end holiday season, many people don't pay much attention to the financial news reports. This is not surprising, since there is traditionally little in the way of attention-grabbing news upon which to focus. Thus, there is a good chance you missed our coverage last week of the salary structures being worked out for the CEOs of Fannie Mae and Freddie Mac.
It appears that Fannie Mae's Michael Williams and Freddie Mac's Charles E. Haldeman Jr. are in line to each receive a base salary of $900,000 for 2009 and 2010. In today's economy, few people would balk at the prospect of taking home a six-digit income. However, there's another digit waiting for Williams and Haldeman.
According to a filing with the Securities and Exchange Commission, both Williams and Haldeman have the possibility of earning a deferred base salary of $3.1 million each. What do they have to do to jump up the earnings chart from $900,000 to $3.1 million? It appears they will pocket the extra earnings only if their respective enterprise ‘meets performance metrics’ and if a government review of their work confirms they performed a well-done job.
Now, it would be wrong of me to deny people the right to earn a decent living. Nor am I the type to set up barricades for a class warfare skirmish.
However, from a public relations standpoint, it is extremely difficult to convince the average American that the heads of two money-losing agencies deserve to earn a higher salary than President Obama, who earns a $400,000 annual salary. At a time when unemployment is in the double digits and most Americans with jobs are struggling to get by, the Williams and Haldeman salary news sends the worst possible message.
Such extravagant salaries might be tolerated if Fannie Mae and Freddie Mac were financially stable. Of course, they are not – actually, it is quite the opposite. Fannie Mae lost a total of $56.9 billion for the first nine months of 2009, while Freddie Mac lost $14.1 billion in the same period. There is no place outside of the federal government where such catastrophic loses can fall into the concept of ‘meets performance metrics.’
Indeed, if Fannie Mae and Freddie Mac were 100% privately owned and not government-sponsored enterprises being propped up solely with billions of taxpayer dollars, they would have gone bust.
We have yet to receive any clue when, where or how Fannie Mae or Freddie Mac will emerge from government conservatorship. For all intents and purposes, they are government agencies, and will remain that way for the foreseeable future.
But if they are going to be government agencies, then perhaps their respective leaders should not be receiving more than double the salary of the U.S. president. Nor should there even be any consideration of deferred base salaries until the red ink flow from the enterprises dries up and a new flow of black ink starts to emerge.
Going forward, there needs to be a very serious conversation about the exact future of these ailing enterprises. Giving Wall Street-worthy salaries to their respective CEOs is not going to solve the problem. If anything, it will breed a new flurry of discontent with the American public, who have yet to see any return on investment regarding the billions in taxpayer funds that went into keeping Fannie and Freddie alive.
– Phil Hall, editor, [b][i]Secondary Marketing Executive[/i][/b]
[i] (Please address all comments regarding this opinion column to hallp@sme-online.com.)[/i]
