WASHINGTON Two Democratic lawmakers on Tuesday said the $24 million in pay awaiting Fannie Mae's and Freddie Mac's departing chief executives should be reduced by the federal agency that just took control of the mortgage finance companies.
Sens. Charles Schumer, D.-N.Y., and Jack Reed, D-R.I. both of whom sit on the Senate's banking committee said the financial mismanagement that led the government to take over the companies on Sunday justifies such a move.
"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 in a letter to James Lockhart, director of the Federal Housing Finance Agency.
The senators noted that Lockhart will have authority to reduce the executives' compensation under a provision in a sweeping housing bill passed in July.
They said taxpayer dollars should not "enrich the same individuals who are responsible for preventable financial problems that have weakened Fannie's and Freddie's ability to weather the current crisis in the financial markets."
Former Fannie CEO Daniel Mudd is due to receive up to $8.4 million in compensation, while Richard Syron, Freddie Mac's former chief executive is due to receive up to $15.5 million, said David Schmidt, a senior consultant at executive compensation consulting firm James F. Reda & Associates.
Syron's package, Schmidt said, is "very unusual" because it allows him to receive $8.8 million in cash to replace stock grants and options that are now worth little or nothing. Representatives of Fannie and Freddie declined to comment. An FHFA spokeswoman did not immediately comment.
Herbert Allison was named the new chief executive of Fannie and David Moffett, the new CEO of Freddie on Sunday as part of the Treasury Department's takeover of the two huge mortgage financing agencies. The two companies own or guarantee about $5 trillion of the nation's outstanding mortgages, about half the nation's total.
Lockhart said Sunday that compensation for the new executives will be "significantly lower than the outgoing CEOs."
Mudd received $12.2 million in compensation in 2007 and Syron was paid $19.8 million, prompting some members of Congress last month to seek curbs on pay for the companies' executives.