The federal regulator of Fannie Mae and Freddie Mac awarded $3.4 million raises to the housing giant’s CEOs, according to recent SEC filings, disregarding the Obama administration and other lawmakers who called the move inappropriate.
The Treasury purchased a controlling share of Fannie and Freddie during the 2008 financial crisis, and in 2012 former Federal Housing Finance Agency Director Edward DeMarco capped CEO salaries at $600,000. The agencies still owe taxpayers $188 billion, and are on the hook for any future collapse. (RELATED: Fannie And Freddie May Need Another Bailout)
But Wednesday FHFA Director Mel Watt granted Fannie CEO Timothy Mayopoulos and Freddie CEO Donald Layton $3.4 million raises, increasing their salaries to $4 million. He argued the raise was necessary to retain the CEOs and ensure stability and future success of the housing finance companies, reported The Wall Street Journal.
Watt also told TheWSJ the new level of compensation is “well below” that of the bottom 25 percent of CEOs at comparable companies, such as Allstate and PNC.
The Treasury Department said it opposes the move and has urged Fannie and Freddie to reject the increases.
“While FHFA ultimately has sole authority over executive compensation at both enterprises, Treasury has consistently recommended that existing limits on compensation continue, given the taxpayers ongoing backstop of both enterprises,” a Treasury spokeswoman told TheWSJ.
To keep Fannie and Freddie afloat in 2008, the Treasury purchased $188 billion of shares, placing them in conservatorship. They have paid the Treasury more than $230 billion in dividends on those shares since 2013, but are still backed by taxpayers. (RELATED: Fannie And Freddie Ordered To Subsidize Low-Income Housing)
“[The salaries are] egregious as American taxpayers continue to bear the risk,” Rep. Ed Royce, a senior member of the House Financial Services Committee, told The Hill. “We appear to be tip-toeing back to a permanent ‘quasi’ state for our secondary housing market with private market compensation levels backed by taxpayers.”