In what has become a complete and total rebuke of an effort put forth by Federal Housing Finance Agency Director Mel Watt to award $3 million raises to the CEOs of Fannie Mae and Freddie Mac, President Obama signed into a law a bill that caps the salaries of Fannie Mae CEO Timothy Mayopoulos and Freddie Mac CEO Donald Layton.
According to the White House, President Obama signed the Equity in Government Compensation Act of 2015 on Wednesday.
A statement from the White House states that the President signed S. 2036, the “Equity in Government Compensation Act of 2015,” which "suspends compensation packages approved for 2015 for the chief executive officers of (Fannie Mae) and (Freddie Mac) and any of their affiliates, and reinstates the compensation and benefits previously in effect."
The act, which is based on legislation by Rep. Ed Royce, R-CA, would cap the pay of the Fannie and Freddie’s CEO' at its current level, which is $600,000, instead of the $3 million raises that were awarded to Mayopoulos and Layton earlier this year by the FHFA.
Two weeks ago, the House of Representatives unanimously passed the Senate version of the GSE CEO pay limit bill, which was authored by Sen. David Vitter, R-La., and Sen. Elizabeth Warren, D-Mass.
According to Royce’s office, the vote in the House was passed by a “voice vote,” meaning there were no House members that requested a roll call vote.
“Essentially, no Member was willing to go on record with their opposition to the bill,” Royce said when the bill passed the House. “Therefore, it’s accurate to say that the entire OC delegation supported the bill, or at the very least no one opposed it enough to request a recorded vote.”
The Senate version also passed unanimously last month.
Royce said that the bipartisan effort to get this bill signed into law can prove as a roadmap for further GSE reform.
"Reaching a similar bipartisan consensus on winding down Fannie and Freddie is critical, as the federal government's dominance of the housing market is unsustainable," Royce said of the bill being signed into law. "We should encourage more private capital in the system to ease the way for future comprehensive housing finance reform."
Earlier this year, Federal Housing Finance Agency Director Mel Watt authorized the GSEs to propose new executive compensation plans for the position of CEO that may be as high as the 25th percentile of the market, or approximately $7.26 million a year.
But the raises for the GSE CEOs were met with a stern rebuke from Congress. Royce’s bill passed out of the House Financial Services Committee by a 57-1 vote on July 29, 2015.
The U.S. Department of the Treasury had also stated that it was not in favor of the GSE CEO pay raises.
"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 earlier this year.
“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.”
The White House also declared its support for the bill as well.
Earlier this year, White House Press Secretary Josh Earnest said, "I think it is entirely legitimate for the executives at those institutions to be subject to compensation limits" when asked about the White House's view on executive raises at the GSEs.
And President Obama followed through on that statement Wednesday, signing the Equity in Government Compensation Act of 2015 into law.
Layton, for his part, said recently that the fact that his pay raise could soon disappear was not a concern.
In a recent interview with the Wall Street Journal, Layton said that he views the job as a “public service matter” and said the compensation wasn’t the “big attraction” to the job for him.
"I regard this as something that is happening inside the government,” Layton said in a video interview with the WSJ’s Shelby Holiday.
“I signed up for this job personally as a public service matter so the compensation wasn’t the big attraction to me and so I really just don’t regard it as a big issue personally,” Layton continued.