(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Agnes T. Crane
NEW YORK, Dec 10 (Reuters Breakingviews) - Fannie Mae
FNMA.OB and Freddie Mac FMCC.OB employees don't need
outsized pay. Whatever their quasi-private sector past, they're
now managing the U.S. government's money – and they're paid by
Uncle Sam, too. The Treasury secretary and the Federal Reserve
chairman take home just under $200,000. There’s no reason for
dozens of housing agency staff to pocket multiples of that.
The Federal Housing Finance Agency, the regulator and
conservator of the two housing finance enterprises, has
published a new report showing that 23 executive vice presidents
across both firms made a median $1.7 million last year, while
another 62 senior vice presidents typically pulled down
$723,500. That's a lot for people who are, in essence, in public
Sure, Fannie and Freddie used to be publicly traded, and
they rewarded employees generously. But that all came to an end
in 2008, and they are now on a Treasury drip-feed. FHFA boss
Edward DeMarco has in the past defended the companies' Wall
Street-like pay. But this year he finally took a hatchet to the
pay of the two giants' chief executives, reducing it by nearly
90 percent to $600,000. It's logical the rest should follow.
There's a plan to cut the cash compensation of some
executives by 10 percent. Yet that would still leave pay that
looks high. Fannie argues that it needs to pay salaries that
will attract bankers so that it can manage the "risk and
operational complexity associated with a $3 trillion business."
But highly paid executives didn't prevent Fannie and Freddie
being sucked into the mortgage crisis. And other areas of
government need plenty of financial nous, too.
The Fed, for instance, has about the same $3 trillion of
assets to keep tabs on. Bill Dudley, the president of the
central bank's New York unit, makes just $410,780 – still double
what his Washington boss, Ben Bernanke, is paid – and his
organization is at the sharp end of the Fed's market activity.
Meanwhile Timothy Geithner's team at Treasury has to figure out
how to avoid default every time the U.S. debt approaches the
In 2008, the last thing the government needed was for useful
employees to flee Fannie and Freddie. But four years later the
two groups are stuck in the public sector, their CEO pay
reflects that, and austerity is in the air. It's time to own up
to reality and make overdue reductions in their other pay
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- The median cash compensation in 2011 for 23 executive vice
presidents at U.S. housing finance giants Fannie Mae and Freddie
Mac was $1.7 million, according to the Inspector General of the
Federal Housing Finance Agency, which regulates the two
enterprises. Median wages for 62 senior vice presidents came to
$723,500, the FHFA found in a report published on Dec. 10.
- In 2012, the FHFA decided to reduce the annual
compensation of the chief executives of Fannie and Freddie to
$600,000 from $5 million.
- Timothy Geithner, the Treasury secretary, and Ben
Bernanke, the chairman of the Federal Reserve, are each being
paid $199,700 in salary for 2012.
- FHFA report: link.reuters.com/qat54t
- Reuters: Regulator needs to monitor Fannie, Freddie staff
pay – watchdog [ID:nL1E8N7741]
Frannie's finest [ID:nL1E8H65FR]
- For previous columns by the author, Reuters customers can
click on [CRANE/]
(Editing by Richard Beales and Emily Plucinak)
Keywords: BREAKINGVIEWS FANNIE/FREDDIE
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