WASHINGTON U.S. Democrats on Tuesday criticized
the multimillion-dollar pay packages awarded to the former
chief executives of Fannie Mae FNM.N and Freddie Mac FRE.N
at a time when taxpayers could foot a massive bill for the
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
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.
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
"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 Sept. 24 hearing and the
Senate Banking Committee also is trying to nail down a date.
OTHER PAY PACKAGES
Outrage against high severance packages for U.S.
corporation chiefs has been brewing for many years.
While some may consider the "golden parachute" for Mudd and
Syron high, it is a fraction of what was given to other CEOs
whose companies were hammered by the mortgage crisis.
For example, former Countrywide Financial Corp CEO Angelo
Mozilo took home $120 million, ex-Merrill Lynch MER.N CEO
Stanley O'Neal received a $161 million retirement package and
former Citigroup (C.N) CEO Chuck Prince got $39.5 million in
stock, options, bonus and perks.
Mudd's predecessor, Franklin Raines, received an annual
pension of $1.37 million when he retired from Fannie in late
Raines was also in line to receive $5.8 million in stock
options and $8.7 million in deferred compensation to be paid
through 2020, according to a U.S. regulatory filing.
Former Freddie Mac Chief Executive Leland Brendsel received
a pay package of more than $50 million.
Both CEOs left their companies during a massive accounting
(Additional reporting by Deborah Charles in Riverside,
Ohio, Editing by Jonathan Oatis)