- Federal records show the heads of the two firms have bonus targets of about $2 million
- The bonuses are in addition to their base salaries of $900,000 per year
- "Such excessive compensation seems wildly imprudent," lawmakers say in a letter
Lawmakers are trying to block million-dollar bonuses to top executives at Fannie Mae and Freddie Mac, the mortgage-backing firms that required a giant taxpayer bailout.
Federal records show the heads of the two firms, Charles Haldeman Jr. and Michael Williams, each have bonus targets in the neighborhood of $2 million. Those bonuses are in addition to their base salaries of $900,000 per year.
The two troubled companies required about $170 billion in taxpayer assistance, worse than any other government bailout to date. And both are losing money, posting combined losses of $10 billion for the most recent quarter.
Members of Congress are calling on the Federal Housing Finance Agency, which oversees the government's conservatorship of the firms and approved the pay packages, to suspend the bonuses.
In a letter to the agency, 60 senators, led by Republican Sen. John Thune and Democratic Sen. Mark Begich call the bonuses "wasteful." They cite a recent report in Politico saying that a total of $12.8 million in bonuses has been approved for 10 top executives.
"Such excessive compensation seems wildly imprudent," they wrote, at a time when "American families are tightening their belts in light of the struggling economy."
Thune called it "absolutely indefensible."
In the House, the head of the Financial Services Committee, Rep. Spencer Bachus, is calling the bonuses "an added insult to the taxpayers who are forced to foot the bill."
A Senate panel has summoned the Federal Housing Finance Agency, chief Edward DeMarco, to appear Tuesday, and a House panel has summoned him for Wednesday.
But agency officials say the executives at Fannie and Freddie are being awarded bonuses because they are taking the right steps to try to turn things around.
In a letter sent Senators last week, DeMarco said the current leaders at the firms are not the ones responsible for the failures -- those individuals have left, without severance.
Any changes to the pay packages, he warned, "could disrupt the functioning of the companies and thereby add even greater losses on the American taxpayer."
"Given the amount of money at risk here," he said, "it would be irresponsible of me" to risk further turnover, or settle for inexperienced managers and staff.
"I need to ensure that the companies have people with the skills needed to manage the credit and interest rate risks of $5 trillion worth of mortgage assets," DeMarco wrote.
He added that executive pay has been reduced by 40% since 2008, and is now at or below the level of comparable private-sector jobs. Fannie Mae and Freddie Mac play a central role in the mortgage system, backing the majority of residential mortgages in the country. They were created by the government to make home ownership possible for as many people as possible, and designed to run independently. But in 2008, as more and more of their home loans went bad, they were threatened with insolvency, and the government took them over.
Clifford Rossi, of the University of Maryland's business school, says the executives' compensation deals are largely warranted, and to change them would be penny-wise and pound-foolish.
"You do have to pay them a competitive wage," he said. "You can't just find these people right off the street."
But Rossi, who has worked at Fannie and Freddie as well as Citigroup, wants to see the incentive pay tied to higher performance benchmarks.
He says their pay should depend on whether Fannie and Freddie succeed in helping more struggling homeowners with their mortgages, for example through loan modifications.
The loan modification program, started in 2009, has fallen short of its goal of helping at least 3 million homeowners.
"So from that standpoint," he said, "when you think about what executives should be paid, is that really success? I'm not sure."