Democratic Massachusetts Sen. Elizabeth Warren wants to make sure top executives at mortgage giants Fannie Mae and Freddie Mac are not being paid more than a congressionally-mandated salary cap allows.
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In a recently unveiled proposal – called the Respect the Caps Act – Warren is looking to close a loophole both agencies are said to be taking advantage of in order to pay their top executives millions.
Warren’s legislation was developed in response to a watchdog report from the Federal Housing Finance Agency’s (FHFA) Inspector General. According to the report, the FHFA – which oversees Fannie and Freddie – approved plans that circumvented the congressionally-mandated salary cap at the two agencies, which is set at $600,000. This was said to be done by separating the CEO and president roles, transferring tasks from the CEO to the president, and raising the president's pay. Presidents are not subject to the pay cap.
As a result, two executives at Fannie were said to be paid $4.2 million to perform the same tasks a CEO has performed for $600,000. At Freddie, the figure was $3.85 million.
"Following the financial crisis, Congress passed my bipartisan bill to cap pay raises for executives at Fannie Mae and Freddie Mac. Instead of enforcing the law, the FHFA has allowed executive compensation at Fannie to increase by $3.6 million and at Freddie, by $3.25 million," Warren said in a press release.
If the director of the Federal Housing Finance Agency – a post that Mark Calabria was just confirmed to – were to approve salaries that exceeded the $600,000 cap, he could be removed according to the terms of the bill.
The cap was put in place in 2015 after the former FHFA director sought to allow executives to receive a hefty, multimillion dollar pay package.
Fannie Mae, which recently confirmed Hugh Frater as CEO, declined to comment on the legislation. Freddie Mac did not return FOX Business’ request for comment.
Meanwhile, both agencies are the subject of an administration-led housing reform effort. President Trump tasked the Treasury and Housing departments with developing reform proposals aimed at ending conservatorship of the government-sponsored mortgage giants. Fannie and Freddie have been operating within the government since being bailed out for nearly $200 billion at the height of the financial crisis in 2008.