Both Fannie Mae and Freddie Mac CEOs will get multimillion-dollar paydays despite the objections of lawmakers and the White House, an article in The Wall Street Journal said.
In separate filings with the Securities and Exchange Commission on Wednesday, Fannie Mae and Freddie Mac disclosed that their respective CEOs, Timothy J. Mayopoulos and Donald Layton, would have a total annual target compensation of $4 million each, effective Wednesday.
The salaries of Messrs. Mayopoulos and Layton had been capped at $600,000 for the past two years.
Back in May, Freddie revealed in its earnings statement that the board of directors received a communication from the director of the Federal Housing Finance Agency on the compensation of the CEO, as follows:
“Freddie Mac is authorized to submit a proposal for FHFA review and consideration on executive compensation for the position of Freddie Mac CEO to address the Board’s obligation and FHFA’s conservatorship and supervisory objectives of providing for CEO retention; effective succession planning for the CEO position; and continuity, efficiency and stability of operations during this extended period of conservatorship in which the future of the Enterprise is uncertain and the Enterprise is engaged in market transformative work.”
Fannie Mae and Freddie Mac paid top executives a combined $35 million in 2009 and 2010, while the CEOs at Fannie and Freddie earned a combined salary of $17 million with options to take home $24 million.
FHFA Director Mel Watt said in a statement that the current CEO compensation framework limits the ability of the boards of directors at Fannie Mae and Freddie Mac to promote retention of their CEOs, to develop reliable CEO succession plans and to ensure continuity of operations and organizational stability.
“All regulators require the boards of their regulated entities to have viable succession plans. While the enterprises remain in conservatorships, continuity and stability are integral to the ability of FHFA to fulfill its statutory responsibility to ensure Fannie Mae and Freddie Mac operate safely and soundly and foster liquidity in the national housing finance markets,” Watt said.
However, as The Wall Street Journal aritcles noted, “In granting the pay increase, Federal Housing Finance Agency Director Mel Watt defied the White House and some lawmakers who said the raises weren’t appropriate for companies still backstopped by taxpayers.”
The U.S. Treasury Department “does not support FHFA’s new approach to CEO compensation at Fannie Mae and Freddie Mac and urged the agency to reject any increase,” said a Treasury Department spokesman. “While FHFA ultimately has sole authority over executive compensation at both enterprises, Treasury has consistently recommended that existing limits on compensation continue given the taxpayers ongoing backstop of both enterprises.”
For HousingWire Executive Editor Jacob Gaffney’s take on the situation, click here.