Fannie, Freddie Execs Defend Big Bonuses on Capitol Hill
The executives of home mortgage giants Fannie Mae and Freddie Mac defended their large salary bonuses in testimony Wednesday on Capitol Hill. The companies have received $169 billion in government support since 2008 and have asked for an additional $13 billion. Lawmakers from both parties expressed outrage.
Fannie Mae CEO Michael Williams and Freddie Mac CEO Charles Haldeman have received, along with eight other executives, a combined $13 million in bonuses for their work at the failing companies. In the hearing before the House Oversight Committee, they argued that their compensation levels are necessary to attract the talented workers needed to see the companies through difficult times.
“We need to compensate our executives and employees to ensure that we have and keep the leadership we need to continue our progress,” Williams said.
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Rep. Trey Gowdy (R-S.C.) argued that, since the companies are not making a profit, the bonuses are being paid by taxpayers. “Surely, you can understand the frustration of taxpayers who are paying bonuses while the bus is driven through the gates of hell.”
Rep. William Lacy Clay (D-Mo.) expressed confusion over why executives are receiving bonuses when the companies are failing. “I'm mystified as to why these so called achievements should entitle executives to million dollar bonuses.”
Haldeman said he understood the criticism. “I understand totally why Congress and the American people are outraged at executive compensation at companies that have received federal support. … We have nine percent unemployment in the country and we have millions of families at risk of losing their homes.”
The executives' compensation packages were approved by the government, Josh Boak, a reporter for Politico, explained in a Wednesday interview on PBS' “The Newshour.” One of the performance incentives was tied to modifying mortgages to help those with mortgages stay in their homes.
“One of the key things that lawmakers and President Obama wanted to do is get people out of bad mortgages, and the answer is, they got pretty nice compensation for not a lot modifications,” Boak said.
Another House committee passed a bill, 52-4, on Tuesday that would stop the bonuses and reduce overall pay. While the bill is expected to pass in the House, it could be obstructed in the Senate.
Republicans have accused President Obama of hypocrisy for not speaking out strongly against the bonuses. Obama had, in the past, been sharply critical of executive pay and bonuses at companies receiving taxpayer bailouts.
Former Speaker of the House Newt Gingrich has also been stained by the controversy in his bid to become the Republican nominee for president. His consulting firm received $1.8 million from Freddie Mac.
Fannie Mae and Freddie Mac are private companies which were started by the government to help provide home loans. They made large profits during the housing bubble. Critics charge they caused the housing bubble. After the collapse of the housing market in 2008, both companies were on the verge of bankruptcy. But in Sep. 2008, the federal government took over the companies to prevent them from failing.
