Wednesday, November 16, 2011

House Committee Votes to Suspend Bonus Pay for GSE Execs

The House Financial Services Committee voted in favor of a bill Tuesday that would prohibit Fannie Mae and Freddie Mac from paying out future bonuses and suspend the 2011 compensation packages that have been approved by their regulator.

The Equity in Government Compensation Act (H.R. 1221) passed the committee by a vote of 52 to 4. It now moves to the full House for consideration.
Earlier this month, it was disclosed in public filings that the Federal Housing Finance Agency (FHFA) and Treasury had signed off on $5.6 million in compensation for Fannie Mae’s top executive and $5.4 million for Freddie Mac’s.
According to a statement from the House Financial Services Committee, under the approved bill, the chief executives at the GSEs could only have earned $218,978 this year. The measure would align compensation for executives and employees at Fannie Mae and Freddie Mac with the pay practices at federal financial regulatory agencies.
Rep. Spencer Bachus (R-Alabama), chairman of the House Financial Services Committee, is the author of the bill. He called taxpayers’ support of the GSEs “the biggest bailout
in history,” and the executives’ compensation and bonuses “unfair, unreasonable, and unjust to the taxpayers whose assistance is the only thing keeping Fannie and Freddie afloat.”
On the other side of Capitol Hill the very same day the House committee passed its measure, the Senate Banking Committee held an oversight hearing on FHFA, and executive pay at the GSEs was one of the main topics of conversation.
Edward DeMarco, acting director of FHFA, was the star witness, and he used the spotlight to defend his decision to sign off on the multi-million dollar bonus packages.
“Others may believe that this sort of talent is easily and quickly hired at compensation far below that of competing private firms, but I do not,” DeMarco told lawmakers.
“This is a question of judgment,” he went on to say, “judgment exercised by balancing the need to limit compensation as much as possible while ensuring stable and continuous operations at the enterprises in support of the nation’s housing finance system.”
As DeMarco’s testimony continued, he pointed the finger instead at members of Congress.
“The best way to address concerns with executive compensation is action by Congress to reform the housing finance system and dissolve the conservatorships,” DeMarco said.
The Senate is also expected to take up a bill addressing GSE pay. Sens. Jay Rockefeller (D-West Virginia) and John McCain (R-Arizona) announced last week that they intend to propose a measure prohibiting Fannie Mae and Freddie Mac executives from receiving future multi-million dollar bonuses as long as the government-backed mortgage companies remain in federal conservatorship

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