BLOG VIEW: Now, About Those GSE Severance Packages…

Few people would openly advocate that Daniel H. Mudd and Richard F. Syron, the departing heads of Fannie Mae and Freddie Mac, define the notion of a job well done. Yet both men stand to enjoy ridiculous profits as part of their severance packages.

The New York Times exposed the sums that Mudd and Syron stand to reap, and it is enough to aggravate hypertension: Mudd's exit package could level at $9.3 million, while Syron could pocket a cool $14.1 million. The Times also reports that Mudd has already made $12.4 million in pay and stock option gains since he took over Fannie Mae in 2004, while Syron enjoyed $17.1 million in pay and stock option gains since he became the Freddie chief in 2003.

Of course, there is no guarantee that Mudd and Syron will be exiting with all of that money. Their severance packages hinge on whether their respective dismissals were ‘without cause.’ The Federal Housing Finance Agency, which is now regulating Fannie and Freddie, is not dropping clues on whether they will give Mudd and Syron a free pass, demand a reduction in their severance packages or fight for a full revocation of the funds.

This situation will probably drag on for months. The Bush administration, in comments by Anthony W. Ryan, the assistant secretary of the Treasury for financial markets, made it clear it was not looking to engage in ‘finger-pointing’ to determine who was to blame for the Fannie and Freddie debacle. Furthermore, Fannie and Freddie are clearly a hot potato for the Congress, and the last thing Capitol Hill wants is investigative hearings prior to an election. Any federal inquiry on the collapse of Fannie and Freddie – whether based in a Congressional or Department of Justice setting – will be a long time in coming, if it comes at all.

I am a strong believer in giving rewards to people who do exceptional work. But neither Mudd nor Syron come within miles of being lauded for their respective performances at the helm. Considering that the shareholders in both government-sponsored enterprises were wiped out as a result of the federal takeover of Fannie and Freddie, and considering that American taxpayers are putting out billions to pay for this takeover, the idea that either man would walk out of their offices with millions in compensation is the ultimate sick joke.

– Phil Hall, editor, Secondary Marketing Executive.

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