Democrats question Fannie, Freddie CEO exit pay

By John Poirier and Kevin Drawbaugh

WASHINGTON (Reuters) - Democrats on Tuesday criticized the multimillion-dollar pay packages awarded to the former chief executives of Fannie Mae and Freddie Mac at a time when taxpayers could foot a massive bill for the companies' bailout.

In a joint letter to Fannie and Freddie's regulator, Senators Charles Schumer of New York and Jack Reed of Rhode Island said the combined pay and bonus packages of about $24 million should be revised.

"We find it way out of line," they said in the letter, saying the severance pay for former Fannie Mae CEO Daniel Mudd and former Freddie Mac CEO Richard Syron should be questioned especially if any financial losses could have been caused by errors in management.

The U.S. Treasury Department over the weekend seized control of the two government-sponsored entities, which together back about half the country's $12 trillion in home mortgages.

The senators said the regulator should use newly given authority when reviewing Mudd's and Syron's compensation.

"We urge you to quickly review the compensation packages," the senators said to James Lockhart, director of the Federal Housing Finance Agency.

The U.S. government takeover came as worries heightened over shrinking capital at the congressionally chartered companies, which had combined losses of nearly $14 billion in the last four quarters.

U.S. Treasury Secretary Henry Paulson has said the final price tag for taxpayers cannot be estimated until the extent of the declines in the mortgage market is fully known.

OBAMA TROUBLED

Democratic presidential candidate Barack Obama, at a news conference in Riverside, Ohio, said he wrote to Treasury Secretary Henry Paulson and Lockhart on Monday urging them to put the interest of taxpayers first.

"I'm troubled by the news reports that the outgoing CEOs may be in line to receive multimillion-dollar severance packages as part of the Treasury plan," the Illinois senator told reporters.

"It would be unacceptable for executives of these institutions to earn a windfall at a time when U.S. Treasury has taken unprecedented steps to rescue these companies with taxpayer resources," he said.

The issue of pay is likely to come up in congressional hearings this month when key lawmakers are expected to call in the major players in the GSE takeover to testify.

House of Representatives Financial Services Committee Chairman Barney Frank will hold a September 24 hearing and the Senate Banking Committee also is trying to nail down a date.

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