Fannie Mae and Freddie Mac are back in the news, as it was recently revealed that Freddie Mac paid over $1 million to presidential candidate and former Speaker of the House Newt Gingrich to be a consultant.
Gingrich maintains he simply gave advice to the company, which was not followed — this is not illegal. As Bryan Preston points out, Gingrich is merely guilty of feeding at the government trough. While troubling, this is hardly a matter comparable to that of top executive compensation at Fannie and Freddie: they took millions, while taxpayers shoveled out billions to try to rescue the giants.
Rep. Darrell Issa (R-CA), chairman of the House Committee on Oversight and Government Reform, released a report on their compensation just prior to a November 16 hearing on executive salaries at the mortgage giants. The testimony was rather interesting: Issa asked several questions of both Fannie Mae CEO Michael Williams and Freddie Mac CEO Ed Haldeman regarding their compensation. They didn’t seem to be able to remember how much money they’d made in recent years.
Williams has been with Fannie for decades. He could remember how much money he’d made in 1991 when he started — $115,000 — but not how much he made the year before he became CEO, nor the first time he made more than $1 million in a year. Such a thing should be memorable, as Issa noted.
Meanwhile, Haldeman — who made roughly $9 million over the last two years at Freddie — couldn’t remember how much money he’d made his last year in the private sector.
According to the report, the actual numbers are staggering:
In 2009 and 2010, the Enterprises’ (ed. note “Enterprises” is Fannie and Freddie) top six officers were given a total of more than $35 million in compensation. Of that amount, a total of $17 million in compensation was given to the CEOs of the Enterprises.
Government ownership of Fannie and Freddie has easily turned into “the most expensive bailout of the 2008 financial crisis.” Since entering conservatorship, the Enterprises have taken $169 billion from the Treasury and still owe taxpayers $141 billion. Every quarter, the total continues to mount as the Enterprises keep posting net losses. Freddie recently asked Treasury for an additional $6 billion after reporting $4.6 billion in net losses in its third quarter earnings, and Fannie requested an additional $7.8 billion in aid after reported a third quarter loss of $5.1 billion. With FHFA’s (Federal Housing Finance Agency) projection that it will cost at least $51 billion more to support the Enterprises through 2014, the overall bill to the American taxpayers will not be cheap.
Of that $35 million in total compensation, nearly half was salaries and bonuses for Williams and Haldeman:
The total approved compensation for the top six executives at Fannie and Freddie for 2009 and 2010 totaled more than $35.4 million. The Enterprises’ two CEOs received approximately $17 million. In 2010, Ed Haldeman, Freddie Mac’s CEO, received a base salary of $900,000, and took home an additional $2.3 million in bonus pay. Haldeman stands to make as much as $6 million in 2011. Meanwhile, Michael Williams, Fannie Mae’s CEO, took home $900,000 in base pay in 2010, along with an additional $2.37 million in performance bonuses. Williams also may take home as much as $6 million in 2011. One Fannie Mae executive, Susan McFarland, received a $1.7 million signing bonus upon joining Fannie in June 2009. In contrast, FHFA Acting Director Edward J. DeMarco — the Enterprises’ conservator — earns only $239,555 a year.
The report goes on to note that overall compensation is down 40 percent from before the companies were placed in conservatorship, and FHFA has taken steps to address executive pay. But the changes are small-scale and “are insufficient to stem taxpayer-funded losses at Fannie and Freddie.” In fact, the FHFA’s Office of Inspector General said the executive pay structure at Fannie and Freddie “will likely continue to generate significant controversy.”