Freddie Mac headquarters in McLean, Va. (Chip Somodevilla / Getty…)
Reporting from Washington —
Pay for the top 15 executives at Fannie Mae and Freddie Mac will be cut by 24% this year, led by plans to slash the total annual compensation for new chief executives of the housing finance giants from $6 million to $500,000, federal regulators said Friday.
The announcement came after congressional outrage over salaries and bonuses at Fannie Mae and Freddie Mac, which were seized by the government in 2008 and have received about $183 billion in taxpayer money to cover huge losses in their mortgage portfolios.
Edward J. DeMarco, acting director of the Federal Housing Finance Agency, said the new compensation plan, which also eliminated bonuses, reduces compensation for top executives by 74% from its levels before the government took over the companies.
The new pay structure "strikes the balance between prudent executive pay ... with the need to safeguard quality staffing in order to protect the taxpayers' investment," he said.
But the huge CEO pay cuts won't be applied to the current holders of those jobs, who have announced their plans to step down when replacements are hired.
The targeted 2012 total pay for Fannie Mae Chief Executive Michael J. Williams and Freddie Mac Chief Executive Charles E. Haldeman Jr. will be reduced 10% -- the same cut as other top executives -- though neither is expected to stay on the job for the entire year. FHFA officials determined that it would be unfair to cut their pay to $500,000.
The FHFA plans to limit the salary of their replacements to that figure, although the agency is still trying to fill those jobs. The 92% reduction in the total direct compensation for the chief executives, combined with the 10% cut for the other high-ranking employees, translate to a 24% overall reduction for the top 15 executives at each company, the FHFA said.
Still, many executives will be earning seven-figure salaries in 2012. Freddie Mac Chief Financial Officer Ross Kari will receive $3.15 million in total compensation this year, and Fannie Mae Chief Financial Offier Susan R. McFarland will get $2.88 million.
Chief financial officers are among the few exceptions to the new pay plan, the FHFA said. Also exempted are executives who already are being paid lower than comparable private-sector positions, and some recent hires.
The total compensation for executives could be reduced further because of poor financial performance of the companies. Deferred salary subject to such reductions makes up 30% of the pay packages of the executives.
House Financial Services Committee Chairman Spencer Bachus (R-Ala.) said the new pay plan was long overdue. He has pushed for legislation that would have limited the compensation for top executive at Fannie Mae and Freddie Mac last year to $218,978.
"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," he said.
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