DeMarco defends pay of Fannie, Freddie executives
Federal Housing Finance Agency leader Edward DeMarco responded to scathing criticism of executive pay at the government sponsored enterprises on Thursday, saying compensation levels have already been cut by 40% and the agencies need consistent, top talent to oversee $5 trillion of mortgage assets and $1 trillion in new taxpayer-supported business.
"I have concluded that it would be irresponsible of me to risk this enormous contingent taxpayer liability with a rapid turnover of management and staff, replaced with people lacking the institutional, technical, operational and risk management knowledge requisite to the running of corporations with thousands of employees and more than $2 trillion in financial obligations each," DeMarco wrote.
The letter comes before a Senate Banking Committee meeting to consider the issue on Nov. 15. DeMarco will attend that hearing.
DeMarco's defense of GSE executive pay comes days after 60 U.S. senators sent a letter criticizing executive pay at Fannie Mae and Freddie Mac. The senators criticized regulators' approval of $13 million in bonuses to 10 employees at the mortgage giants, according to Securities and Exchange Commission filings.
DeMarco noted that while the criticism is understandable given the recent taxpayer bailouts, he is charged with making sure the GSEs have the talent to manage the assets that inevitably are supported by taxpayers and will remain a priority even as the government moves towards a private housing system.
"The public scrutiny and criticism is often harsh, and almost everyone expects the enterprises to cease to exist, at least in their current form, in the future," DeMarco wrote. "At the same time, the taxpayer is backing enterprise financial commitments that have thirty year lives, and we will need expert management of those guarantees for years to come. Given the amount of money at risk here, small mistakes can easily be amplified to losses far greater than the compensation paid to enterprise executives."
"Losses at Fannie Mae and Freddie Mac have already resulted in more than $170 billion in taxpayer expense, and I consider it the most important part of my job to minimize any further taxpayer costs," DeMarco said.
DeMarco said after the GSEs were placed in conservatorship, executive pay was cut on average by 40% and in consultation with the Treasury a new pay structure was adopted that the government had designed for large, special assistance TARP organizations.
"Over the past two years, we have reduced the number of top level positions, and as these positions turn over, we have further reduced pay levels," DeMarco said.
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