December 24, 2009 / 2:18 PM / 9 years ago

UPDATE 3-Regulator approves mlns for Fannie, Freddie execs

* Regulator OKs pay up to $6 mln for Fannie, Freddie CEOs

* Pay applies to 2009 for both firms, 2010 for Freddie

* Pay packages seen needed to “attract and retain” talent (Recasts, edits throughout, adds details, background)

By Corbett B. Daly

WASHINGTON, Dec 24 (Reuters) - The chief executives of Fannie Mae and Freddie Mac, the mortgage finance giants that have gotten more than $100 billion in taxpayer-funded bailouts, could each get paid up to $6 million this year under pay packages approved by the top U.S. housing regulator.

The approvals by the Federal Housing Finance Agency were part of a wider decision on executive salaries at both firms.

The regulator’s acting director, Edward DeMarco, on Thursday defended the executives’ compensation, saying that for Fannie Mae and Freddie Mac to continue to play a key role in the U.S. mortgage market they must “attract and retain the talent needed to accomplish these objectives.”

Fannie Mae and Freddie Mac play a role in funding three-fourths of all U.S. residential mortgages.

DeMarco said that executive pay at the companies had dropped, on average, 40 percent from where it stood before the companies were seized by the government and put into conservatorship in September 2008 at the peak of the credit crisis.

In filings with the Securities and Exchange Commission on Thursday, the companies said Fannie Mae CEO Michael Williams and Freddie Mac CEO Charles Haldeman would each receive up to $6 million in total compensation for 2009.

The CEOs will each receive $900,000 in salary, $3.1 million in deferred payments and an additional $2 million if performance targets are met.

Freddie Mac said the same figure would apply to the Haldeman’s pay package for next year, as well.

The announcement on their pay came less than 24 hours after the Obama administration’s pay czar, Kenneth Feinberg, approved millions of dollars in pay for top executives at General Motors and GMAC, the only two other companies still operating under bailout money from the government’s $700 billion financial rescue fund.

FHFA said the Fannie Mae and Freddie Mac compensation plans use the same basic structure as the Feinberg plans and were approved in consultation with the U.S. Treasury.

Pay curbs imposed by Feinberg had sent financial giants Citigroup Inc and Bank of America Corp rushing to exit the government bailout program to avoid compensation restrictions.

Fannie and Freddie do not have that luxury because the government now controls nearly 80 percent of each company.

HIGH BUT SHARP DEPARTURE FROM PAST

Despite DeMarco’s defense of the pay packages, others found them excessive.

They are “more than what is needed for them to serve their function,” said Thomas Lawler, founder of Lawler Economic & Housing Consulting in Leesburg, Virginia. “To give to someone that much to just stay on makes you question just how critical they really are.”

Still, the compensation packages at Fannie Mae and Freddie Mac represent a sharp departure from the practices in place at the height of the U.S. housing boom.

Fannie Mae had paid Franklin Raines $91 million as chief executive between 1998 and 2003, some of which was clawed back in a settlement with regulators over his role in an accounting scandal at the company. His successor, Daniel Mudd, was paid $13.4 million in 2007.

Williams took the helm of Fannie Mae in April when Herb Allison stepped down as CEO to take a job at the Treasury Department overseeing the financial bailout fund. Allison, who had declined to take a salary while at Fannie Mae, now earns an annual salary in the low six figures.

Haldeman took the Freddie Mac position in July and the company then disclosed he would be paid $900,000 in salary without disclosing other forms of compensation. He is the former chief executive of Putnam Investments in Boston.

The companies and their regulator said the executive pay packages for 2009 and 2010 would consist of a base salary, performance-linked incentive pay and a deferred salary. (Additional reporting by Julie Haviv; editing by Leslie Adler)

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