Future chief executives of Fannie Mae and Freddie Mac, the government-run housing finance companies, will receive pay packages worth substantially less than the multi-million-dollar deals granted the current CEOs, the chief regulator for the agencies said on Tuesday.
The chief executives of both companies are set to depart sometime this year. Their 2011 annual compensation, which could approach $7 million, has drawn criticism from U.S. lawmakers.
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The Federal Housing Finance Agency, the regulator for the two mortgage finance firms, in consultation with the U.S. Treasury, has the final say on executive pay at the companies, which have been propped up by $169 billion in taxpayer aid.
"FHFA anticipates a substantial decrease in CEO compensation when the new CEOs are hired," said Corinne Russell, an FHFA spokesperson.
The pay packages for the CEOs of Fannie and Freddie, which the FHFA approved in consultation with the Treasury Department, have followed the same pattern over the last few years. The pay structure was set in 2009.
Currently, both chief executives earn annual base salaries of $900,000. In addition, they each could take home about another $6 million once deferred pay and bonsues are factored in.
The top executives at the two firms, which are the two biggest providers of funding for U.S. mortgages, together earned a total of $35 million for 2009 and 2010, according to a report from the FHFA Office of Inspector General.
The FHFA has said the salaries and deferred compensation awarded to executives at Fannie Mae and Freddie Mac, which were seized by the government in 2008 as mortgage losses mounted, are needed to attract and retain top talent.
While the FHFA did not specify what the pay scale would be going forward, the likelihood the CEO compensation will be curtailed may pose a challenge to the mortgage giants as they try to recruit new executives.
Lawmakers have blasted the level of executive pay at the two firms.
Lawmakers in the U.S. Senate introduced legislation in November to put strict limits on pay. In the House of Representatives, a panel approved a bill the same month to require the two companies to use the federal employee pay scale and cut executive salaries; that legislation has not gone to the full chamber for a vote.
Edward DeMarco, the FHFA's acting director, has told Congress the firms need to be able to compete with other financial service companies for highly skilled executives. Undercutting their ability to do so could harm taxpayers, he said.
He told a Senate committee in November that the FHFA would seek to gradually reduce salaries.
"My plan for executive compensation is to continue to seek opportunities for gradual reductions, particularly when executives leave," DeMarco told the Senate Banking Committee on Nov. 15. (Reporting By Margaret Chadbourn; Editing by Leslie Adler)