Spending by Fannie, Freddie comes under scrutiny

By Peter Schroeder - 11/03/11 12:29 PM ET

Fannie Mae's and Freddie Mac's spending practices while on a federal lifeline are coming under closer scrutiny by both parties.

Senate Banking Committee Chairman Tim Johnson (D-S.D.) announced Thursday that his panel would be looking into recent bonuses handed out to executives at a future hearing "as soon as possible." Ten executives received $12.79 million in recent bonuses, even as Fannie and Freddie remain in federal conservatorship, supported by taxpayer dollars.

He added that he planned on summoning to testify Edward DeMarco, the acting director of the Federal Housing Finance Agency, which regulates the two entities and is charged with approving its compensation structures.

"As conservator of Fannie Mae and Freddie Mac, FHFA, under Mr. DeMarco's leadership, is responsible for approving compensation and maintaining adequate internal controls to oversee the day-to-day operations at Fannie Mae and Freddie Mac," he said. "This committee, the Congress and taxpayers need to be confident that those controls are in place and the conservator is upholding its responsibilities.”

On the other side of the Capitol, the pay perks were getting similar scrutiny. Rep. Randy Neugebauer (R-Texas), who chairs the House Financial Services subcommittee on oversight and investigations, sent a letter to DeMarco Wednesday, demanding answers for how Fannie and Freddie are spending funds.

He accused the two entities of adopting a "business as usual" approach to their finances, spending like a private company while on federal support, when those expenses should be "rigorously justified and as lean as possible."

"I am concerned that Fannie and Freddie are spending money in ways and at levels that do not further the purposes of their conservatorships," he wrote.

In particular, he keyed in on several aspects of Fannie's finances, such as the fact that it spent $1.6 million on tuition assistance, $20.5 million in corporate contributions, $6 million on advertising and $27.7 million on "travel and entertainment."

In addition, he said Fannie's recent expenses report does not detail how much it spent on public relations and lobbying, nor did it break out what made up the $66.8 million spent on "miscellaneous expenses."