Severance for ousted GSE chiefs to be reviewed

WASHINGTON (Reuters) - Separation pay packets for ousted chiefs of mortgage finance companies Fannie Mae and Freddie Mac will be reviewed but the federal government does not plan to try and recover any of the money, their regulator said on Monday.

The director of the Federal Housing Finance Agency, James Lockhart, was asked on Public Broadcasting Service's "Nightly Business Report" whether the government might try to recover some of the millions of dollar worth of pay and incentives that Freddie Mac Chief Executive Richard Syron and Fannie Mae Chief Executive Daniel Mudd received in recent years.

"We're not going to try to get part of the money back," Lockhart said, noting that part of it was in the form of stock options that plunged in value as the companies' shares plunged.

Replacements for Syron and Mudd were named on Sunday.

"The new CEOs will have salaries and benefits significantly lower than the old CEOs," Lockhart said.

The government stepped in on Sunday to take control of Fannie Mae and Freddie Mac, placing them in a conservatorship that lets their stock keep trading but puts common shareholders last in line for any claims.

Lockhart said the two government-sponsored enterprises had met a legal definition of being "adequately capitalized" on June 30 but he described those capital rules as "antiquated" and "much too low for companies exposed to this kind of risk."

He said regulators had found "a significant deterioration over the last three months; risks were just growing, credit risks were growing, losses on private label mortgage-backed securities were growing," and that led to the decision to take control of them.

In a separate interview on Bloomberg television, Lockhart was asked why common shareholders were placed behind even holders of subordinated debt in terms of their rights.

"There were some clauses in the subordinated debt that might have an impact on the senior debt at some time in the future and we just didn't want that kind of uncertainty there," Lockhart said. "We wanted to make sure that everyone knew that the senior debt and MBS (mortgage backed securities) were safe and sound."

As for current investors, Lockhart said it was "unfortunate that this market was much worse than anybody anticipated and they took some risks and unfortunately weren't rewarded for it."

(Reporting by Glenn Somerville; Editing by Leslie Adler)