NEW YORK — The two chief executives of Fannie Mae and Freddie Mac will be paid as much as $6 million for 2009, despite the companies’ dismal performances that cost taxpayers more than $100 billion this year.
Fannie Mae’s CEO, Michael Williams, and FreddieMac CEO Charles “Ed” Haldeman Jr. each will receive $900,000 in salary, $3.1 million in deferred payments next year and another $2 million if they meet certain performance goals, according to filings with the Securities and Exchange Commission on Thursday.
The pay packages were approved by the TreasuryDepartment and the Federal Housing Finance Agency, which regulates Fannie Mae, the Federal National Mortgage Association, and Freddie Mac, Federal Home Loan Mortgage Corp.
That compares with the $10.2 million former Fannie CEO Daniel Mudd received and $13.1 million former Freddie CEO Richard Syron pocketed in 2008. Both executives were ousted when federal regulators seized the companies in September 2008, and the federal government blocked exit packages for the pair worth up to $24 million.
Since then, Fannie Mae and Freddie Mac have needed $111 billion in taxpayer money to stay afloat, one of the most expensive aftershocks of thefinancial crisis.
Mark Borges, principal with management consulting firm Compensia, says the compensation is warranted.
Haldeman and Williams each could command between $5 million and $10 million in a similar position in the private sector, Borges estimated, and without thesignificant challenges and public scrutiny they face at these companies.
“I doubt too many people would look at these jobs and say, ‘Gosh, I would love to go there for my next career move,’” Borges said. “The government is getting top-notch executives to solve problems that are not easy to solve.”
The bulk of their pay is also not guaranteed, Borges said, so these executives can’t pocket and run and must meet certain long-term goals or risk giving some of it back.
Freddie Mac’s board sets the CEO’s performance goals, which won’t be disclosed until next year. Fannie Mae’s filing outlined its corporate goals including “being a recognized leader in the housing recovery,” “protecting taxpayers,” and “managing risk more effectively.”
Fannie Mae and Freddie Mac declined to offer further details on CEO performancegoals.
In response to reports of public anger over Wall Street pay, the Obama administration imposed pay curbs on banks that received governmentbailouts. All the major banks have since repaid their federal money, largely to escape caps on executive pay.
Former Bank of America Corp. CEO Ken Lewis, for example, agreed to forgo his salary and bonus this year under pressure from the government. Last year, he earned more than $9 million in total compensation. Bank of America received $45 billion in government assistance, which it has since repaid.
Freddie Mac hired Haldeman, a former mutual-fund executive, in July. At the time, the company disclosed his annual salary of $900,000 but did not disclose other incentive payments. In September, the company hired a new chief financial officer, Ross Kari, and said his pay package would be worth up to $5.5 million.
Williams, formerly Fannie Mae’s chief operating officer, took over as CEO in April after the first governmentappointed chief executive, Herbert Allison, took a job at the Treasury Department. Williams earned a base salary of $676,000 last year, plus a retention award of $260,000.
Fannie Mae and Freddie Mac provide vital liquidity to the mortgage industry by purchasing home loans fromlenders and selling them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion. That’s about half of all mortgages.
Without government aid, the firms could have gone broke, leaving millions of people unable to get a mortgage. And most experts say the price tag for the bailouts will rise and complicate the government’s exit strategy.
The Obama administration on Thursday said it is removing a $400 billion financial cap to funds it can give to Fannie Mae and Freddie Mac to keep them from failing.
Treasury Department officials said the cap will be replaced with a flexible formula to ensure the companies will have all the government support needed to stand behind the mortgage-backed securities they sell to investors.
While most analysts believe that the companies are unlikely to use the full $400 billion, the administration decided to remove the cap to eliminate any uncertainty about the government’s commitments.
Information for this article was contributed by Alan Zibel and Martin Crutsinger of The Associated Press.
Business, Pages 24 on 12/25/2009