BLOG VIEW: Charles E. Haldeman Jr. recently announced that he will step down next year as CEO of Freddie Mac. Haldeman was the head of Putnam Investments before he joined Freddie Mac in 2009 – and, it seems, he expected and received Wall Street-level pay for his time as a public servant.
According to a March 31 report issued by Steve Linick, the inspector general of the Federal Housing Finance Agency (FHFA), Haldeman received $7.8 million in compensation at Freddie Mac for 2009 and 2010 – his annual base pay is $900,000 and the extra cash came as a ‘bonus.’ I am not in the habit of complaining about what people are paid, but I make an exception when it comes to the executives at the government-sponsored enterprises (GSEs).
For starters, their salaries are fueled entirely by taxpayer money – lest we forget, Freddie Mac and Fannie Mae have been in federal conservatorship since September 2008. Paying Wall Street-level salaries to federal employees is more than a little peculiar, especially in today's dismal economy, and it seems grossly out of place when you consider that President Obama's salary is approximately $400,000. Why is the head of Freddie Mac making more than double the president's salary?
Even worse, Haldeman's compensation level is not connected to any measurable results. I would not object to his monetary intake if Freddie Mac was setting new standards in profitability. However, since Haldeman took charge, Freddie Mac has not produced a single penny of profit. Last week, Freddie Mac reported a net loss of $4.4 billion during the third quarter, and the FHFA is asking the Department of the Treasury to fork over $6 billion to keep the GSE afloat.
So who is to blame for this massive waste of money? According to Linick in his March 31 report, the FHFA dropped the proverbial ball.
‘FHFA has a responsibility to Congress and taxpayers to efficiently, consistently and reliably ensure that the compensation paid to Fannie Mae's and Freddie Mac's senior executives is reasonable,’ Linick said. ‘This is especially true when you realize that the U.S. Treasury has invested close to $154 billion to stabilize Fannie Mae and Freddie Mac, and the GSEs are spending tens of millions of dollars for executive compensation.’
Seven months after Linick's report was released, it appears that the FHFA has ignored everything that its inspector general had to say. But why is this a surprise? Under the incompetent leadership of Acting Director Edward J. DeMarco, the FHFA has devolved into such a clueless mess that it makes the agency's predecessor – the disastrous Office of Federal Housing Enterprise Oversight – look like a model of Swiss-timing precision in comparison.
Then again, no one in Washington really cares about this. The Obama administration – which never produced any strategy to drive GSE reform to a clear deadline of measurable results – casually delinked the GSEs from the federal budget, thus allowing them to vacuum up endless amounts of taxpayer funds without being accountable to congressional budgetary oversight.
Not that Congress is paying attention. Earlier this year, the House GOP tossed together a hodgepodge of vague bills allegedly addressing the issue before setting their viewfinders on dreaming up new ways to throw monkey wrenches into the White House policy machine. GSE reform is one of the lowest priorities on today's Capitol Hill.
As a result of Washington's eagerness to maintain the GSE status quo, the secondary market continues to be all-but-monopolized by the federal government. Any attempt to reanimate the private-label market will be doomed to failure as long as Fannie Mae and Freddie Mac run the show. And without a vibrant private-label market, the mortgage banking industry will remain in its doldrums for the foreseeable future.
Not that Haldeman has shown any concern. In fact, he made it clear that the status quo will remain firmly in place until after next year's presidential election.
‘It doesn't seem like we're in an environment where many decisions are being made,’ Haldeman said.
Except, of course, the decision to keep shelling out millions in taxpayer money to GSE executives that do a crummy job. Ka-ching!
– Phil Hall, editor, Secondary Marketing Executive
(Please address all comments regarding this opinion column to hallp@sme-online.com.)
