If any organization should see a big restriction in executive compensation, it should be the government-seized, taxpayer-rescued Fannie Mae and Freddie Mac. Congress has expanded the bailout of the two GSEs at the heart of the global economic collapse a number of times, with the potential cost to the Treasury estimated as high as $363 billion dollars. Recall, too, that the Obama administration created a “pay czar” to regulate executive compensation at private-sector banks that took TARP money to discourage excessive compensation. As the Wall Street Journal reported last week, the White House seems to care less about that issue in the public sector:
A federal watchdog criticized federal regulators’ oversight of executive pay packages for top officials at Fannie Mae and Freddie Mac in a report published Thursday.
The top six executives at the mortgage giants earned $35 million in the last two years, according to the report from the inspector general of the Federal Housing Finance Agency, which regulates the mortgage giants.
The firms were taken over by the government in 2008 and have cost taxpayers $134 billion. Both firms have seen heavy turnover at the senior ranks.
Freddie Mac Chief Executive Charles E. Haldeman Jr. joined Freddie Mac in 2009, becoming the fourth person to head the company in a 12-month span. Michael Williams, a Fannie Mae veteran, took the top job at the company in 2009.
The report criticized the government for failing to independently verify whether the companies had adequately met certain performance-related compensation targets.
Republicans want the federal pay system imposed at Fannie and Freddie to cut compensation to its executives. The Obama administration’s acting director of FHFA, the agency overseeing Fannie and Freddie, complained that this would make it more difficult to compete for talent:
Edward DeMarco, the acting director of the FHFA, warned Thursday that the “disruptiveness” of such a change could make it harder for the government to recover the value of its investments in the companies.
“The government has enormous exposure here on $5 trillion in mortgage securities,” he said. “I’d like to make sure we have qualified people managing that … on behalf of the taxpayer.”
Well, isn’t that true of the firms that fell under the control of the Pay Czar, as well? At least in those cases, the continuing compensation resulted from private-sector revenues and not infusions of government cash. The hypocrisy is rather stunning, and Rep. Thad McCotter pointed out on Fox News yesterday that the nation can’t afford to offer bonuses to GSEs that continue to suck cash out of taxpayer pockets:
Actually, pay czar Kenneth Feinberg approved these compensation packages, claiming that they met the “unique problems” of Fannie and Freddie at the time. Losing money based on bad business decisions isn’t a “unique problem,” especially not for the federal government. If the talent argument works for Fannie and Freddie, then it also works for the private sector — and Obama should never have inserted himself into the private-sector compensation process in the first place. Now it looks as though the administration doesn’t want Congress to control compensation in the public sector.