House Committee Votes on GSE Pay Cuts

Executives at Fannie Mae and Freddie Mac are one step closer to a massive pay cut following a vote by the House Financial Services Committee to suspend the current compensation packages at the two government sponsored enterprises (GSEs) that have been under federal conservatorship since August 2008.

The Committee, on Tuesday, voted 52 to 4 to send HR1221, the Equity in Government Compensation Act to the full House.  The bill, sponsored by Spenser Bachus (R-AL) the Committee Chairman, will reduce the compensation of the GSE executives and employees to bring it into line with the compensation of Federal employees.

According to the Federal Housing Financial Agency which is conservator for the GSEs, the CEOs of Freddie Mac and Fannie Mae received $5.4 million and $5.6 million respectively in compensation this year.  Under HR1221 the total compensation of each would have been $218,978.  Both CEOs and most of the high-level executives at the two firms were hired after the companies were placed in receivership.

The total compensation paid in 2010 by Fannie Mae to six executives was $15.4 million in salaries and bonuses while Freddie Mac paid five executives $18.5 million.  These executives will now be paid according to the government's Executive Pay Scale and lower level employees will be paid according to the governments General Pay Scale.

"Today the Committee approved a bill to stop rewarding the executives of these bailed out companies," Bachus said.  "Never again should Americans be forced to send their hard earned tax dollars to be wasted on multi-million dollar pay packages for Fannie and Freddie executives."

FHFA had argued that the executives accepted employment with the GSEs at considerable future risk because of the uncertainty of the programs' futures and were subject to much scrutiny and considerable negative commentary from various sources.   Restoring the GSEs' credibility and financial stability, the Acting Director Edward J. DeMarco has said, requires that there be capable persons running the program with the ability and motivation to remain in those positions.