Shareholders in Fannie Mae and Freddie Mac saw the value of their stock nearly disappear Monday after the mortgage giants had been taken over by the federal government, but the companies' chief executives will leave after banking millions and taking millions more on the way out the door.
Fannie Mae's Daniel Mudd and Freddie Mac's Richard Syron stepped down but are helping with the transition of their companies into federal conservatorship under the Federal Housing Finance Agency. The agency has not said how much they will earn in their new roles.
Mudd earned $11.6 million last year, and Syron made $18.3 million. In both cases, a large portion of their pay packages included stock that was valued much higher at the end of 2007 than it was as of Monday, when it was trading at less than $1 a share.
By conservative estimates, Mudd, 49, and Syron, 64, will leave with an additional $7.3 million and $6.3 million, respectively, as part of a severance package, according to an analysis by Paul Hodgson at the Corporate Library.
"Had they left at the end of December, they both would have walked away with more than $20 million, but the drop in the stock price has had a dramatic impact," said Hodgson, a senior research associate. "It's still a substantial payoff for an executive who has managed a company so badly that the federal government has had to step in and save it."
Presidential candidate Sen. Barack Obama (D-Ill.), in a letter to Treasury Secretary Henry M. Paulson Jr. and James Lockhart, the housing agency director, urged them to void the "inappropriate" payments.
"Under no circumstances should the executives of these institutions earn a windfall at a time when the U.S. Treasury has taken unprecedented steps to rescue these companies with taxpayer resources," Obama wrote.
The amounts are much smaller than those earned by other CEOs fired recently after their companies stumbled. Stan O'Neal left Merrill Lynch & Co. with a retirement package worth more than $160 million, and Charles O. Prince, the head of Citigroup Inc., left with a $40-million deal.
Still, some market watchers think Mudd and Syron should leave with little more than the contents of their desks. "It's just another example of pay for failure," said Amy Borrus, deputy director of the Council of Institutional Investors.
Both Mudd and Syron were brought in to reform the troubled mortgage giants.
