* Regulator sees pushing pay lower as executives leave
* Lawmakers seek to block million-dollar pay packages
* Fannie, Freddie have received $169 bln in taxpayer aid
By Margaret Chadbourn and Dave Clarke
WASHINGTON, Nov 15 A bill to block
multimillion-dollar executive pay packages at Fannie Mae and Freddie Mac moved forward on Tuesday
even as their regulator defended them as necessary to retain
top talent and limit taxpayer losses at the bailed-out
The U.S. House of Representatives Financial Services
Committee approved the legislation 52-4, clearing it for a vote
in the full House. A similar measure has been introduced in the
Lawmakers from both parties have expressed shock at
revelations the two government-owned mortgage finance firms,
which have been propped up with about $169 billion in federal
aid, were paying out $12.79 million in bonuses for 10
"The taxpayer-funded bailout of Fannie Mae and Freddie Mac
is the biggest bailout in history," said Representative Spencer
Bachus of Alabama, chairman of the House panel. "Adding insult
to injury, the top executives of these failed companies receive
multi-million-dollar pay packages."
Edward DeMarco, acting director of the Federal Housing
Finance Agency, tried to parry the congressional critics.
"At the present, my plan for executive compensation is to
continue to seek opportunities for gradual reductions,
particularly when executives leave," he told a Senate Banking
DeMarco said the firms, the top two providers of funding
for U.S. mortgages, need to be able to compete with other
financial service companies for highly skilled executives.
"We have an entire competitive marketplace in the industry
that suggests compensation is an important factor in attracting
and retaining top talent," he said.
As the regulator, DeMarco has broad authority to direct the
companies' activities, and he approved the pay in consultation
with the Treasury Department. The pay packages have followed
the same pattern over the last few years; the structure was set
He said one of the "biggest concerns that has driven" the
the executive compensation packages is an apprehension that the
two companies will lose key staff if they are not fully
compensated for their marketable skills. As employees leave,
DeMarco has tried to reduce pay levels for their replacements.
PUTTING A CAP ON IT
The House bill would suspend the 2011 pay packages for
Fannie Mae and Freddie Mac executives and force FHFA to come up
with a compensation system for executives that is based on a
government pay scale.
The committee adopted an amendment that would use the pay
scale that applies to independent financial regulators, such as
the Federal Deposit Insurance Corp, which allows for higher pay
than at most federal agencies. Representative Al Green, who
offered the amendment, said this would have the effect of
limiting the highest salaries to about $260,000 per year.
Senate Banking Committee Chairman Tim Johnson, a South
Dakota Democrat, expressed concern that tying pay to a
government scale could do more harm than good.
"I fear that the federal pay scale will chase away the
knowledgeable people we have and rely on to do a great job in a
highly complex situation," he told Reuters.
Fannie Mae and Freddie Mac were seized by the government
and placed in conservatorship in 2008 as soured home loans
threatened their solvency. Given the central role they play in
the U.S. mortgage system, the Treasury offered them an
unlimited credit line through next year to protect the already
battered housing sector.
Some Republicans said it was unfair for the Obama
administration to expand the bailout without moving forward on
a plan to wind down the government's role.
Lawmakers in the Republican-led House have debated bills to
shutter the firms at the committee level, but the Democrat-led
Senate has yet to take up any legislation, even though both
Democrats and Republicans largely agree the companies will
eventually need to be closed down.
"We have done nothing," said Republican Senator Bob Corker
of Tennessee, who has sponsored legislation to put a new
housing finance structure in place. "Unless Congress comes
forward, and gives concrete direction, we're going to end up in
a permanent conservatorship."
DeMarco told the Senate committee any changes in pay should
not be a "sudden shock" and said the best way to reduce
compensation would be for lawmakers and the Obama
administration to agree on a future course.
"Then we could have a final resolution of Fannie Mae and
Freddie Mac in conservatorship, which would resolve the
compensation issue once and for all," he said.