Congress to Cap Pay for Fannie, Freddie CEOs

The Federal Housing Finance Agency announced March 9 that it will cap annual compensation at $500,000 for the new chief executives of Fannie Mae and Freddie Mac, but Congress is considering legislation that would further decrease pay to $275,000 per year, National Mortgage News reported.

The FHFA’s half-million-dollar salary cap represents a 75 percent reduction in CEO pay since the two government-sponsored enterprises were taken under conservatorship in 2008. National Mortgage News reported that Heidrick & Struggles, Fannie Mae’s head hunting firm, is telling candidates they can expect to earn only about twice as much as the President of the United States and not to expect bonuses.

Fannie’s departing CEO Michael Williams earned an annual base salary of $900,000, though with bonuses and other forms of compensation, his take-home pay actually amounted to around $6 million, National Mortgage News reported.

Responding to Congressional actions to further reduce compensation, FHFA Acting Director Edward J. DeMarco said any salary reduction below the $500,000 benchmark would “heighten safety and soundness concerns.”

“A sudden and sharp change in pay from these levels would certainly risk a substantial exodus of talent, the best leaving first in many instances,” DeMarco said in a news release. “A significant increase in safety and soundness risks and in costly operational failures would, in my opinion, be highly likely.”

Fannie and Freddie chief financial officers are exempt from any base salary cap, however, which means CFOs would earn more than CEOs. The GSEs’ CFOs Ross Kari and Susan McFarland will both make more than $600,000 this year.

One former GSE executive told National Mortgage News that, should Congress further reduce CEO compensation below the FHFA benchmark, the agency might be able to work around a cap by calling the new executives consultants rather than government employees.