WASHINGTON (Reuters) - 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 companies’ bailout.
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 mortgages.
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 told reporters.
“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.
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 2004.
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 scandal.
Additional reporting by Deborah Charles in Riverside, Ohio, Editing by Jonathan Oatis