The Federal Housing Finance Agency (FHFA) has announced a new executive pay program for Fannie Mae and Freddie Mac that caps chief executives' salaries at $500,000 and eliminates bonuses.
‘I believe the new compensation program strikes the balance between prudent executive pay, including the elimination of bonuses, with the need to safeguard quality staffing in order to protect the taxpayers' investment and achieve the objectives in the conservatorship scorecard,’ says FHFA Acting Director Edward DeMarco. ‘A sudden and sharp change in pay from these levels would certainly risk a substantial exodus of talent, the best leaving first in many instances. A significant increase in safety and soundness risks and in costly operational failures would, in my opinion, be highly likely.’
As part of the new pay program, the FHFA will be able to retrieve deferred salaries if Fannie Mae and Freddie Mac executives are found to have engaged in ‘gross misconduct, gross negligence, conviction of a felony or erroneous performance metrics.’ The new compensation program was disclosed in the government-sponsored enterprises' (GSEs) filings with the U.S. Securities and Exchange Commission.
The changes in GSE executive compensation are the result of controversy last year when it was reported that the Fannie Mae and Freddie Mac executives received seven-digit compensation. According to a report issued in November 2011 by the House Committee on Oversight and Government Reform, Fannie Mae President and CEO Michael J. Williams' 2010 compensation included $900,000 in base pay and $2.37 million in bonuses, while Freddie Mac CEO Charles E. Haldeman Jr. earned up to $6 million between his base pay and bonuses. In comparison, DeMarco's annual salary was $239,555. Both Williams and Haldeman have announced plans to leave their respective jobs later this year.