Sure the past year was a tough one for the millions of Americans who lost jobs or faced foreclosure, but at least some people did well. The top executives of bailed-out mortgage finance giants Fannie Mae and Freddie Mac were paid very large salaries — without proper written procedures or analysis, according to an inspector general's report.
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MICHELE NORRIS, host:
A new report out this week is criticizing the pay for top executives at Fannie Mae and Freddie Mac. Those are the mortgage giants that were taken over by the government at the height of the financial crisis. They've cost taxpayers $130 billion and counting.
Since the bailout, the top six executives have been paid more than $35 million. That news comes as Congress is deciding the fate of Fannie and Freddie, as NPR's Sonari Glinton reports.
SONARI GLINTON: Freddie Mac's chief executive, Charles Haldeman, got nearly $8 million in 2009 and 2010. His counterpart at Fannie Mae, Michael Williams, got more than $9 million in the same period.
Professor RICHARD GREEN (University of Southern California): The way these guys are being compensated now is sort of the way CEOs of profitable banks would be.
GLINTON: Richard Green is a professor at the University of Southern California. He specializes in real estate. He says figuring out what to pay execs at Fannie and Freddie is hard because they don't really have counterparts in the private or public sector.
Prof. GREEN: These are not banks. They're specialized financial institutions. They're supposed to help provide mortgage credit to people. And second, they're broke, and they wouldn't be there if the government weren't pumping money into them.
GLINTON: Fannie Mae and Freddie Mac are both overseen by the Federal Housing Finance Agency, or FHFA. And the way it's supposed to work is that Fannie and Freddie present their compensation packages to the FHFA for approval.
Steve Linick is the independent inspector general for the FHFA. He wrote the report that criticizes the pay for Fannie and Freddie executives. He says the agency is supposed to make sure compensation packages are following the best practices.
Mr. STEVE LINICK (Inspector General, FHFA): Essentially, they're trusting without verifying that those individual compensation packages are sound.
GLINTON: The FHFA declined to comment on tape for this story, but the agency released a memo that says, in part, quote: "We are well aware of the difference in pay scales at private firms and government agencies." They go on to say, about Fannie and Freddie, quote: "We believe that employing the level of talent available at private-sector pay scale is the most efficient way to provide the mortgage market services that are required," unquote. Here again is Steve Linick, the inspector general.
Mr. LINICK: The company ties executive compensation to meeting certain corporate and executive performance benchmarks.
GLINTON: Basically, Fannie and Freddie are in the business of creating and selling mortgage-backed securities, but the government was buying a ton of them.
Mr. LINICK: It's possible that that hurdle was almost certainly cleared because the Federal Reserve at the time purchased almost all the mortgage securities issued by Fannie Mae and Freddie Mac in 2009.
GLINTON: What you're saying is that they were able to meet their benchmarks because they had government help, is what you're saying.
Mr. LINICK: That's exactly right. And we're just saying that the agency ought to consider that in determining whether executive compensation is reasonable.
GLINTON: Meanwhile, members of Congress on both sides are taking notice of the way and the amount Fannie and Freddie executives are paid. House Republicans introduced a package of eight bills this week to rein in the mortgage giants. Congressman Spencer Bachus, the chairman of the House Financial Services Committee, introduced a bill to suspend the compensation packages for executives of Fannie Mae and Freddie Mac. They'll get a hearing next week.
Sonari Glinton, NPR News. Transcript provided by NPR, Copyright NPR.