Schumer and Reed Warn Against Fannie/Freddie Severance Pay

Democratic Senatorial Campaign Committee Chairman Charles Schumer (D-N.Y.) and Sen. Jack Reed (D-R.I.) on Tuesday wrote federal officials to urge against any generous financial package for the outgoing chief executives of Fannie Mae and Freddie Mac, calling any bonus pay "out of line" in light of the taxpayer costs for the U.S. government's takeover of the companies.

Schumer and Reed sent the letter to Federal Housing Finance Agency Director James Lockhart to call attention to a combined $24 million in severance pay due to be paid to the two CEOs, according to the senators. Fannie Mae is led by Daniel Mudd and Freddie Mac is led by Richard Syron.

Schumer announced the letters at a noon news conference in the Senate.

Treasury Secretary Henry Paulson announced a plan Sunday to place both companies into conservatorship. Paulson also plans to replace both executives, which Schumer and Reed say would trigger the severance awards under their contracts.
Schumer and Reed said Lockhart could adjust the executives' severance packages under a provision in the housing legislation passed by Congress earlier this year.

"We find it way out of line that these two executives will be rewarded with millions of dollars in bonus compensation at a time when taxpayer dollars may have to be deployed to cover any financial losses caused by errors in management," Schumer and Reed wrote Lockhart. "It has been reported that Mr. Mudd and Mr. Syron stand to make more than $24 million in severance payments as a result of your actions over the weekend to place the companies in conservatorship."

-J. Taylor Rushing