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NEW YORK The top executives at Fannie Mae and Freddie Mac, both losing their jobs as part of a government bailout, may get multimillion-dollar payments from the mortgage finance companies upon their exits.
Departing chief executives Daniel Mudd of Fannie Mae and Richard Syron from Freddie Mac are entitled to payouts consisting of severance, pension benefits and other compensation even as the value of shareholders' holdings in the two companies plummets.
The government rescue announced over the weekend triggered a huge drop in Fannie Mae and Freddie Mac shares, as investors bet the stocks would be worth little under the rescue plan. Both were trading below $1 on Monday afternoon.
"It's outrageous," said Christopher Keller, a partner at law firm Labaton Sucharow LLP who specializes in bringing securities class-actions on behalf of investors.
"They are walking away with millions," he said. "Isn't there now just the unanimous belief that you can't preside over a totally failed entity and walk away rich?"
Freddie Mac's Syron is entitled to about $14.1 million in severance and other payments as long as his employment is ended "without cause," according to an analysis by executive compensation consulting firm James F. Reda & Associates LLC.
That payout includes an $8.8 million payment for the forfeiture of stock holdings -- a benefit he could receive even as the company's shares now have little value, said David Schmidt, a senior consultant at the compensation consulting firm.
Freddie Mac shares were trading at 97 cents apiece on Monday afternoon, down 81 percent on the day, while Fannie Mae shares were at 87 cents, a drop of 88 percent.
Fannie Mae's Mudd stands to get a payout of nearly $9.3 million, including severance, pension benefits and deferred compensation, according to the calculations.
It is unclear, however, whether the departing executives will ultimately collect their severance packages now that the companies are being run by the U.S. government. A spokeswoman for the Federal Housing Finance Agency, which regulates the companies, declined to comment.
Schmidt said that the payouts are based on what is specified in employment agreements for the two men.
"We don't know if there are negotiations going on that could result in greater or lesser amounts," he said.
The payment calculations for both men do not include restricted stock and stock options, which based on the current price of Fannie Mae and Freddie Mac shares mean those awards would now have little value, Schmidt said.
If the stock was trading higher, their total payouts upon departure could be worth much more.
Not including the severance package, Syron has collected about $17.1 million in compensation since becoming CEO of Freddie Mac in 2003, according to Equilar Inc, an executive compensation research firm in Redwood Shores, California.
Mudd has collected $12.4 million in compensation since becoming CEO in 2004, not including the value of the severance package, according to Equilar.
(Editing by Gary Hill)