WASHINGTON (Reuters) - Lawmakers on Wednesday ramped up efforts to block multimillion-dollar bonuses for executives at Fannie Mae FNMA.OB and Freddie Mac FMCC.OB, the government-controlled mortgage finance firms that just this month have sought billions more in taxpayer-funded assistance.
Lawmakers in both chambers and in both parties have expressed shock at revelations the firms, which have been already propped up with about $169 billion in taxpayer aid, were paying out $12.79 million in bonuses for 10 executives.
House Financial Services Committee Chairman Spencer Bachus, an Alabama Republican, said his committee would meet on November 15 to vote on a bill to suspend compensation packages for executives at the two companies.
Under the House bill, which was approved by a subcommittee on a bipartisan vote in April, other employees at Fannie Mae and Freddie Mac would have their salaries tied to government pay scales.
Meanwhile, a bipartisan group of senators said they will file a similar measure in their chamber this week.
Republican Senator John McCain of Arizona and Democratic Senator Jay Rockefeller of West Virginia plan to introduce an amendment backed by seven of their colleagues that prohibits top employees at the firms from receiving lucrative bonuses as long as the companies remain in conservatorship.
“It’s outrageous that Fannie Mae and Freddie Mac executives would expect multimillion-dollar bonuses after $170 billion in taxpayer bailouts and one in every four homeowners’ mortgage underwater,” McCain said in a statement.
Fannie Mae and Freddie Mac, the two biggest sources of funding for U.S. mortgages, were taken over by the government in 2008 as soured home loans threatened insolvency. 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 that already battered housing sector.
Both Fannie and Freddie in recent days reported substantial third-quarter losses and said they would seek more money from the federal government. Fannie, the biggest source of money for U.S. home loans, on Tuesday reported a quarterly loss of $5.1 billion and said it needed a further $7.8 billion in federal aid to stay afloat.
Freddie Mac last week reported its worst quarterly loss in more than a year, at $2.5 billion, and said it needed to borrow another $6 billion from the federal government.
The pay packages approved by their regulator, the Federal Housing Finance Agency, have followed the same patterns over the last few years. The bulk of the pay is set by the boards of Fannie Mae and Freddie Mac and approved by FHFA in consultation with the Treasury Department.
Nonetheless, the pay packages have drawn fierce criticism. Executive pay for 2012 has not yet been determined.
The acting director of the FHFA, Edward DeMarco, has been summoned to appear on Capitol Hill next Tuesday and Wednesday to answer questions from lawmakers about the bonuses. The Senate Banking Committee will hold an FHFA oversight hearing on Tuesday, followed by a House Government Oversight Committee hearing on Wednesday
“This is unacceptable and must change immediately,” Rockefeller said in a statement. “It’s inexcusable that anyone would think it’s OK to hand out these bonuses.”
A bipartisan group of 60 senators sent a letter to DeMarco and Treasury Secretary Timothy Geithner on Friday demanding changes to the executive compensation practices.
The letter, spearheaded by Republican Senator John Thune of South Dakota and Democratic Senator Mark Begich of Alaska, called the reported bonuses “wasteful” and asked that they be brought into line with the “fiscal reality” facing the two firms.
Reporting by Margaret Chadbourn, Editing by Leslie Adler