Last week, Fannie Mae and Freddie Mac did a good thing; they made a decision that would ease the burden for many families during the holiday season. Now, though, they’re once again reminding consumers that they’re definitely in it for the money, as evidenced by their salaries and decisions to release pressers via making announcements themselves, as they did last week when they announced they’d be halting foreclosures during the Christmas holidays.
A new report released late on Monday shows the top ninety employees, not including the CEOs, earned a whopping $92 million. That’s more than a million dollars for each. And you paid for it.
It’s hard to understand the justification. Bonuses weren’t given out last year and the pay packages weren’t nearly as surprising (and infuriating) as they are today. The Federal Housing Finance Agency oversees and regulates the two taxpayer funded agencies.
The average salary for the top 23 executives from both agencies averaged out to $1.72 million in 2011. That’s still startling, but it was also down by 9% from 2010. After those initial 23, the next 60 – plus employees averaged around $723,000 for 2011, which is about a five percent decline from 2010. Were this the private sector, it wouldn’t be so difficult to swallow. The fact that it’s a government agency funded by tax dollars adds a certain bitterness to the controversy.
Even worse is the statement made by Fannie Mae spokesperson Kelli Parsons. In a very carefully prepared statement, she said,
There’s a lot at stake for our country and it is absolutely critical that Fannie Mae compensation is competitive in the market for financial services talent.
Unfortunately, these salaries are not competitive – they are far and beyond average or “mid range”. In fact, few folks are earning those kinds of salaries in this new economy.
What further complicates the situation is the agencies leadership shortcomings. You may recall both were overtaken by the government in late 2008 because the leaders were unable to lead. Worse, the Treasury recently dropped more than $187 billion into the two agencies so that they would remain solvent and able to continue their work. Yet their leaders enjoy these bonuses and impressive salary packages. Before they were overtaken in 2008, they were found to be sorely lacking in the basics of any company: poor standards, lack of operating procedures and a host of other problems that were obviously going to bite the agencies at some point.
Many thought last year’s salary cap for both agency’s CEOs would be a strong incentive for those in higher positions to rein in it. After enjoying annual salaries of more than $5 million, these CEOs saw caps being placed that limits their salaries to just $600,000. There are ways to bypass though, most notably, the bonuses they’re still allowed.
Last week, the CEOs were more than happy to show their faces when they announced they’d be halting all foreclosures until the first of the year. Ah, they were doing good work, after all. Who doesn’t want the admiration of the masses, right? A week later, not only are they refusing to show their faces, but they’re not making any comments at all. Instead, they’re releasing press releases.
The holidays are a chance to be with loved ones and we want to relieve some stress at this time of year,
said Terry Edwards, Executive Vice President of Credit Portfolio Management, Fannie Mae. These were comments made to the media following last week’s announcements.
Remember, the federal government created Fannie and Freddie in order to make home ownership possible for all consumers. Investors saw safety in these mortgages with the government backing them, which allowed them to substantially lower the costs of owning a home. Investors and consumers soon realized the agencies were just as vulnerable as the private sector. Soon, evidence began surfacing that revealed the taxpayer dollars were being used to make a few quite wealthy. Backing high risk loans was just one way greed was taking over. Soon, it was announced both agencies had lost more than $30 billion, partly because of the deals executives were making and partly because homeowners were in over their heads, courtesy of a lack of oversight in the mortgage sector.
Fannie says it will suspend evictions of borrowers living in foreclosed homes from December 19 through January 2. Freddie will put evictions on hold as of December 17. Fannie and Freddie say the foreclosure process and the legal proceedings for evictions may continue, but the actual eviction will not take place during the moratorium.
Fannie Mae is the nation’s largest mortgage buyer and affects more than ten million home buyers.
So what do you think of these massive salaries and swelling bonuses? Should these CEOs be taking such liberties? Should their bonuses be capped, especially since it appears that’s exactly how they’re bypassing the caps placed by the government? Share your thought with us. Does the fact that they no longer need government bailouts change your thoughts?