Fannie, Freddie execs defend pay perks for 'challenging' work

The top executives at Fannie Mae and Freddie Mac on Wednesday said their employees deserved the millions of dollars in bonuses they were awarded.

Testifying Wednesday before the House Oversight Committee, the executives said they understand why people are upset about the payouts at the mortgage giants, which were brought under federal control in 2008.

"We have 9 percent unemployment in our country, and there are millions of families at risk of losing their homes. I understand their outrage," said Charles E. Haldeman Jr., the CEO of Freddie Mac.

But the executives said the sweeteners in the pay packages are necessary to help protect taxpayers from the losses that would result if Fannie and Freddie failed to retain their best workers.

"These are challenging jobs and challenging circumstances, and we need to reward the people willing to do them," said Michael J. Williams, the president and CEO of Fannie Mae. He added that he has lost five senior vice presidents in the last three months to higher-paying jobs.

Lawmakers called the House hearing after it was revealed that the Federal Housing Finance Agency (FHFA) approved nearly $13 million in bonuses for 10 executives at Fannie and Freddie.

Haldeman said if the compensation plans for Fannie and Freddie workers were overhauled, the pain for taxpayers “would last longer.”

The executives pointed out that compensation for their workers has fallen by about 40 percent from before Fannie and Freddie came under federal conservatorship, and said there are difficulties in working for the entities, given their uncertain future, scrutinized position and lagging pay compared to other employment options.

But those arguments did not win much favor from lawmakers, as losses on Fannie's and Freddie's books continue to mount.

"I'm mystified as to why these so called achievements can justify million-dollar bonuses," Rep. William Lacy Clay (D-Mo.) said.

The hearing came one day after the House Financial Services Committee advanced a bill with bipartisan support that would overhaul how the government-sponsored enterprises (GSEs) pay their employees — including a provision that would place most of the workforce on the same pay scale as federal employees.

Edward DeMarco, the acting director of the FHFA, which regulates Fannie and Freddie, stressed Wednesday that the federal support does not mean the GSEs are government entities.

"Fannie Mae and Freddie Mac employees are not government employees and these are not government agencies. They remain private corporations," he said.

He also stressed repeatedly that the men coming under fire at the hearing were not the same men that drove Fannie and Freddie to the point of needing a government lifeline — those men are "long gone from the companies."

Rather, the current executives have the unenviable task of trying to minimize the losses suffered by Fannie and Freddie, as DeMarco told lawmakers he does not expect either to fully pay back the Treasury Department for government support, which has climbed to $170 billion so far.

"They can't undo mortgages that are made, but what they can do is take aggressive action to mitigate those losses," he said.

He also turned the tables on Congress, telling them, as he did a day before at the Senate Banking Committee, that if they wanted to fix pay problems at Fannie and Freddie, lawmakers should figure out how to fix the housing finance market and wind down the entities.

"The best way to address concerns with executive compensation is action by Congress to restructure the nation's housing finance system and dissolve the conservatorship," he said.

While critical of the pay, Republicans on the panel also looked to hammer the White House over the compensation issue, accusing the Obama administration of showing a double standard when it came to hefty bonuses to bailed out institutions. 

Rep. Darrell Issa (R-Calif.), chairman of the Oversight committee, opened the hearing by broadcasting a video of the president railing on Wall Street institutions handing out bonuses to executives while on government support, which concluded by asking why the president was silent on the ones handed out by Fannie and Freddie.

DeMarco and the executives didn't get any help from Democrats, who were just as frustrated at what they said were insufficient efforts by the entities' to help struggling homeowners. Rep. Elijah Cummings (D-Md.), the ranking member on the panel who has repeatedly pressured DeMarco for more homeowner assistance, called current efforts by Fannie and Freddie "woefully inadequate."

Rep. John Tierney (D-Mass.) pressed DeMarco on why the FHFA did not allow for reductions in principal for troubled homeowners, citing support for the idea from people like former Obama economic adviser Lawrence Summers and Federal Reserve Chairman Ben Bernanke.

DeMarco maintained it would not be the most cost-effective approach for taxpayers that would still allow homeowners a chance to stay in their homes.

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