A bill that would suspend the $3 million pay raises recently awarded to the CEOs of Fannie Mae and Freddie Mac is one step closer to becoming law.
The Equity in Government Compensation Act of 2015, which would eliminate the proposed compensation packages for the CEOs of Fannie Mae and Freddie Mac, is now scheduled for a markup by the House Financial Services Committee on Tuesday, July 28.
The Equity in Government Compensation Act was introduced by Rep. Ed Royce, R-CA, on May 8, and would limit the salaries of Fannie Mae CEO Timothy Mayopoulos and Freddie Mac CEO Donald Layton to a level equal with the “highest level paid” at the Federal Housing Finance Agency, the conservator of Fannie and Freddie.
According to a release from Royce’s office, the highest pay level at the FHFA is $255,000.
According to a report from the Wall St. Journal earlier this month, Mayopoulos and Layton’s pay is currently capped at $600,000.
So instead of seeing their salaries increase to an annual target compensation of $4 million each, Mayopoulos and Layton would actually see their salaries decrease if Royce’s bill becomes law.
“Congress needs to put a stop to the planned multi-million dollar paydays at Fannie Mae and Freddie Mac. Holding compensation packages at taxpayer-backed organizations to responsible limits is in the interest of the public trust,” Royce said in statement.
“I thank Chairman Hensarling for advancing this legislation and look forward to building the bipartisan backing it previously garnered,” Royce said of the bill being moved forward to the markup stage.
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.
When the GSE CEO pay raises were announced, 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.
In early May, the FHFA said that it was considering pay raises for Mayopolous and Layton, a move that was met with criticism from the housing industry, members of Congress and even the U.S. Treasury.
"Treasury has consistently communicated to FHFA that a change in CEO compensation at Fannie Mae and Freddie Mac is not appropriate, given that taxpayers continue to backstop both enterprises,” Adam Hodge, a spokesperson for the U.S. Treasury, said at the time.
“Ultimately, FHFA, not Treasury, has sole authority over executive compensation at Fannie Mae and Freddie Mac,” Hodge continued. “Nonetheless, Treasury strongly recommends that FHFA continue its existing limits on CEO compensation.”
Royce was also not in favor of the pay raises, saying at the time that it was “absolutely unconscionable” for the GSE CEOs to receive raises.
“We can't simply put the blinders on and say the GSEs are just like other companies,” Royce said in May.
“We need to move towards a model that allows the private sector to compete on a level-playing field, not one where Fannie and Freddie act like the private corporations with taxpayers on the hook for losses,” Royce continued. “In the interim, I will be introducing legislation to block this potential hike in CEO pay.”
Royce did just that, and now his bill is one step closer to becoming law.