The salaries of the 70 top Fannie Mae and Freddie Mac executives will be limited to $500,000 per year and their annual bonuses eliminated amid pressure from Congress to stop the big payouts.
The pay and bonus structure of the government-controlled mortgage giants came under fire this fall after it was revealed that 12 executives got $35.4 million in salary and bonuses in 2009 and 2010. Fannie's chief executive, Michael J. Williams, received about $9.3 million for the two years. Freddie's chief executive, Edward Haldeman Jr., was paid $7.8 million.
There's no start date in place, but officials say the pay of the two CEOs set to replace the outgoing chief executives, who have both announced they are leaving the company within the next year, will include the new limits. In 2012, Haldeman and Williams will each be paid total salaries of $5.4 million.
The government rescued Fannie and Freddie three years ago after they nearly folded because of big losses on risky mortgages. Taxpayers have spent about $170 billion to prop up the two companies, the most expensive bailout of the 2008 financial crisis.
The Federal Housing Finance Agency, the government agency that oversees Fannie and Freddie, said the executives were hired after the companies were taken over in 2008. After the takeover, the salaries for those positions were reduced by an average of 40 percent and some senior positions were eliminated.
Fannie and Freddie executives receive salaries, bonuses and other forms of compensation for their work, including stock and deferred salary, which is paid after one year with the companies.
Edward J. DeMarco, the FHFA's acting director, has repeatedly defended the salaries and bonuses, saying they were used to retain talented executives and keep the companies running smoothly. Without them, taxpayers could incur greater losses, he said.
"The employees are subject to extraordinary scrutiny," DeMarco said on a Friday morning conference call with reporters. "And they are being paid less than other employees in their field."
One of the mortgage giants' biggest critics — U.S. Rep. Spencer Bachus (R-Ala.), who chairs the House Financial Services Committee — said the change in pay for executives at the troubled firms was "long overdue" and a "step in the right direction."
"The taxpayer funded bailout of Fannie Mae and Freddie Mac is the biggest bailout in history," he said. "The lavish compensation packages and million dollar bonuses that have been given to top executives of these two failed companies are an outrage to the taxpayers whose assistance is the only thing keeping Fannie Mae and Freddie Mac afloat."
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