WASHINGTON (3/12/12)--The Federal Housing Finance Agency (FHFA) last week said it will reduce executive pay at government sponsored enterprises Fannie Mae and Freddie Mac by 75% when compared to their pre-conservatorship levels, eliminate bonuses, and establish a pay target of $500,000 for newly hired CEOs.
Freddie Mac CEO Charles Haldeman and Fannie Mae CEO Michael Williams plan to depart once their replacements have been identified. Both CEOs could earn as much as $5.4 million in compensation this year.
FHFA Acting Director Edward DeMarco said the new compensation program "strikes the balance between prudent executive pay" and protecting taxpayers. DeMarco said more drastic cuts could create safety and soundness concerns.
The FHFA also released a 2012 Conservatorship Scorecard, which will track the FHFA's progress as it works to build a new infrastructure for the secondary mortgage market, gradually contract Fannie Mae and Freddie Mac's dominant presence in the marketplace while simplifying and shrinking their operations, and maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.
The Obama administration is considering a range of options for mortgage market reform, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Administration officials have said that each of these proposals would shrink the government's role in the mortgage market.
For the full FHFA release, use the resource link.