WASHINGTON Jan 13 Republican lawmakers slammed Treasury Secretary Timothy Geithner on Wednesday over multi-million dollar pay packages for executives at mortgage-finance firms Fannie Mae FNM.N and Freddie Mac FRE.N, which the government took over during the financial crisis.
"Awarding millions of dollars in bonuses on the taxpayers' dime is unconscionable," Rep. Jeb Hensarling wrote Geithner in a letter signed by 70 Republicans.
Hensarling, a persistent critic of the two government-supported mortgage finance agencies, also said he was troubled at the Treasury's announcement that it would allow unlimited losses at the two firms. Their losses had been capped earlier at $200 billion.
Treasury announced both the pay packages and the lifting of the loss cap on Dec. 24.
Hensarling and others have criticized President Barack Obama for not offering any proposals about how to structure the companies in the future.
"The Treasury Department has given them a blank check, without presenting any proposals for their reform," Hensarling wrote.
The White House has promised to make suggestions about the future of the companies -- which were chartered by Congress to help boost homeownership -- in its budget proposal, expected in early February.
The top Republican on the House Financial Services Committee, Rep. Spencer Bachus, urged Committee Chairman Barney Frank to take up the pay packages at a Jan. 22 hearing on executive compensation, which Frank has said will focus on bankers' pay.
"It is inconceivable to me that, after these institutions have been given access to unlimited taxpayer funds to cover losses they have incurred as a result of their reckless behavior, their top executives would each be awarded multi-million dollar compensation packages," Bachus said in a statement. Bachus also signed Hensarling's letter.
The Treasury Department declined to comment.
Fannie Mae and Freddie Mac have Congressional charters to support mortgage finance by buying mortgages from lenders and repackaging them as securities for investors.
Because they held lines of credit with the U.S. Treasury, many investors considered their debt second only in quality to government debt, and the companies enjoyed a funding advantage over purely private-sector competitors.
Their quasi-public mission earned them strong support from politicians of both political parties, and the companies grew to wield out-sized political and financial clout.
The Bush administration seized the two companies and placed them in a government conservatorship as the financial storm reached its climax in September 2008, saying that failure of either firm could cause unacceptable turmoil in U.S. housing markets. (Reporting by Mark Felsenthal; Editing by Diane Craft)