WASHINGTON — There's not much that Democrats and Republicans agree on these days, but there's one emerging issue on which they're in complete accord: The deposed chief executives who led mortgage giants Fannie Mae and Freddie Mac into a financial swamp don't deserve to collect multimillion-dollar bonuses on their way out the door.
Members of Congress and both major presidential candidates have been fulminating all week against the idea that the two former executives were entitled to a combined $24 million in bonuses after being fired.
For The Record
Los Angeles Times Friday, September 12, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 42 words Type of Material: Correction
Fannie and Freddie: An article in Business on Thursday about pay packages for ousted chief executives at Fannie Mae and Freddie Mac misspelled the name of a spokeswoman for the Federal Housing Finance Agency. Her name is Stefanie Mullin, not Stephanie Mullin.
Although the White House has remained officially noncommittal, administration officials behind the scenes are trying to find a way at least to whittle down the severance payments.
The furor reflects an overarching political reality: As the government has committed more and more tax dollars to bailing out huge financial institutions to protect the overall economy, it has become more important to avoid even the appearance of rewarding those seen as having contributed to the problem.
"CEOs that led us into this mess are walking away with over $20 million, and we're not going to let that happen as president," Republican presidential candidate John McCain said at a rally Wednesday in Fairfax, Va. "They deserve nothing. They should be paying it back."
In Riverside, Ohio, on Tuesday, Democratic presidential nominee Sen. Barack Obama said: "It would be unacceptable for executives of these institutions to earn a windfall at a time when the U.S. Treasury has taken unprecedented steps to rescue these companies with taxpayer resources."
The government agency in control of the mortgage titans is trying to figure out whether the compensation packages, authorized by the companies' former boards of directors, can be legally altered.
"We're still working through the compensation issues at this time," said Stephanie Mullin of the Federal Housing Finance Agency.
One reason the issue seems to be gathering steam is that, at least for the time being, there's little anyone in Congress can do about the bailout of Fannie and Freddie, which may wind up costing taxpayers billions of dollars. Congress gave the Treasury Department the legal authority for the bailout in July, so its role is limited to commentary and oversight.
Moreover, few are ready to second-guess Treasury's decision, since it is widely accepted that the collapse of the firms that own or guarantee $5.4 trillion in mortgages, or about half the total outstanding in the U.S., could have been a catastrophe for the whole economy.
That has not prevented Congress from expressing discomfort at the prospect of billions in tax dollars going into a bailout. And next week, House and Senate committees are planning high-profile hearings on the takeover.
Serious questions remain to be decided about what should become of the two financial behemoths -- whether they should be reconstituted and, if so, in what form. But that's a debate that opens deep ideological divisions, and the issue is unlikely to be resolved with national elections less than two months away.
In the meantime, said Bert Ely, an independent banking analyst and expert on Fannie and Freddie, it's easy for politicians to earn points with voters by railing about obscene corporate bonuses.
"How many people understand what the secondary mortgage market is?" Ely said. "Fannie and Freddie don't deal with the general population by design. They service $4.8 trillion in mortgages. People can't get their minds around that.
"But $12-million paychecks, that's something people can understand," he said. "It's in the range of winning the lottery or what high-paid professional athletes make. People can get their minds around that."